Student Debt Is Likely Preventing Millennials From Using Credit Cards and Mortgages

TransUnion recently published the 2014 Consumer Wallet Survey, which provides a stark comparison between the types of debt saddled onto borrowers of various generations. The story that this data tells can have long-ranging consequences on the future of U.S. finances. TransUnion is a credit information company, one of the three major resources consumers can go to when they want a free credit report. This company is in the business of collecting national credit usage data.

The statistics reveal that mortgages have been steadily decreasing in the age group of 20-29 year olds during the years of 2005-2014. They drop from 63.2 percent down to 42.9 percent within that nine-year stretch. So what type of debt has replaced mortgages for wallet share amongst this age group? Student loans. Educational debt only held 12.9 percent of wallet share back in 2005 and has since grown to occupy 36.8 percent. This is a 186 percent boost since 2005.

TransUnion identified the total balance of student loans as a “potential cause for concern,” accompanying this statement with a chart displaying different types of loan balances accrued by adults between the ages of 20-29 years of age. They show that credit card debt has sunk by 29 percent since 2009, dropping along with mortgage rates.

On the flip side, the only group to demonstrate increase in mortgage wallet share includes those who are 60 years old and up. Mortgages in this age group have risen from 71.5 percent to 76.3 percent over the last nine years. Additionally, this age group’s average credit card balances have also increased during the same time span. TransUnion warns that “significant student debt in younger age tiers may constrain demand and ability to pay on other loan types.” They describe how lenders might need to cater to younger borrowers with longer repayment terms and lower loan-to-value sums.

The Washington Post warns parents and guardians to think twice before co-signing on their children’s loans, since the consequences can be quite dire. Columnist Michelle Singletary notes that 48 percent of consumers over the age of 60 have student loans because they co-signed for someone else. Singletary urges seniors to seriously consider the ramifications of co-signing, stating, “Don’t let anyone downplay the seriousness of what you are doing when you put your signature on the loan documents.”

The state of student loans has faced increased scrutiny since the total amount of debt hit the $1 trillion mark. Documentary films like Ivory Tower, released in 2014 by Participant Media casts a critical eye at the costs of higher education in the United States, along with the potential risks associated with high average levels of debt incurred by today’s students.

The federal government has taken steps to help families and students become more informed when it comes to financial aid and student loans. The National Student Loan Data System is a centralized database that helps scholars track and manage their borrowing. College Navigator is a service provided by the National Center for Education Statistics, providing students with the average costs of in-state and out-of-state tuition and fees for all public, non-profit, and for-profit institutions of higher learning.