How Debt By Way Of Higher Education Will Ruin Millennials' Lives

by Layton Cox

The Great Recession affected all of America, but its aftermath will perhaps influence Millennials most. The unemployment rate for those over age 34 peaked at about 8 percent, but the unemployment for those between 18-34 peaked at 14 percent in 2010.

There is no doubt Millennials have been extremely unlucky in their first job searches. The Great Recession put 8.6 million people out of work, and 47 percent of them were between the ages of 18 and 34.

Luckily, we are no longer in a recession, and recovery is in full swing. But, that doesn't mean Millennials are totally out of hot water.

During recessions, the younger generations increase schooling as a result of higher unemployment rates.

The desire to enhance skills and become more appealing in a competitive job market is sending more people back to college, grad school and technical schools now than if the economic climate were better.

During the recession, universities nationwide touted their "Biggest Incoming Freshman Class Ever" signs, year after year.

Why is this bad?

Along with increased schooling comes three consequences: 1) increased student loan debt, 2) increased delinquency on student loans, and 3) decreased purchasing power.

Increased Student Loan Debt

The Federal Reserve Bank of New York estimates that in the first quarter of 2014, the total student loan debt was nearly $1.1 trillion. This is more than double what it was in 2005, and larger than any other debt, excluding mortgages.

In 2010, the average monthly student loan payment was $242, making it a high-budget item for recent graduates, behind only housing, food and transportation.

Not only is this a financial strain, but it's also a mental and emotional drain. Recent graduates MUST work to pay off their loans. Your Starbucks barista, the one with a dual degree in marketing and management, has to work in the position he does to make ends meet.

Extra stress, less freedom and more work encompass the bleak future for many Millennials.

Increased Delinquency On Student Loans

Of that $1.1 trillion in student loan debt, roughly 11 percent (or $121 billion) has been categorized as seriously delinquent. This leads to a poor ROI for the federal government and suppliers of student loans. It also leads to poor credit scores; for young families and soon-to-be homeowners, this is a problem.

The effect? Higher interest rates on mortgages, car loans and credit cards. I'm not a fan of debt to begin with, but, unfortunately, I am a minority in my generation.

Millennials' average debt is $23,332, and their average balance per credit card is $2,682. Eventually, Millennials will have to pay back their debts (plus interest) or file for bankruptcy, which doesn't take care of student loans.

Decreased Purchasing Power

Ultimately, all roads lead to Millennials having less money.

By staying in school longer, they are delaying their earnings. By taking out student loan debt, they are eating away at their monthly budgets. By defaulting, they are ruining their credit scores and removing their opportunities to borrow money to purchase homes or start businesses.

Millennials are not able to spend, save, invest or loan money. Our economic system relies on the ability of people to spend, save, invest and loan money.

Millennials are not financially able to purchase first homes or marry; they want to, but can't because they aren't able to save for rings or down payments. They would like to borrow, but their credit scores are too low.

The biggest bet America has ever seen has just been made.

Will all of this extra schooling provide Millennials with future higher incomes that will be used to fund retirement accounts and purchase homes? Or, will all of this extra schooling become a waste of money and youth?

I don't know the answer, and for about 40 more years, no one will know the answer. All I know is that now, our generation can make or break America.

I might be the only one who cares, but while the rest of the world looks at Kim K's ass on Twitter, I'll be here, busting my own, trying to repay old debts.