More millennials are falling into debt. What's to blame for worrisome trend?
Daniel de Visé, USA TODAY
5 min read
More millennials are entering debt consolidation, new data suggest, a worrisome trend for a generation that has fared comparatively well with its finances in recent years.
Millennials, born between 1981 and 1996, represent 43% of new counseling clients at Money Management International, or MMI, leading all other generations, the debt-counseling nonprofit reports. The agency’s average millennial client now carries $30,000 in unsecured debt, including credit card debt.
“We’re seeing this huge jump in the number of millennials that are coming to us,” said Kate Bulger, vice president of business development at MMI. “It kind of feels like it came out of nowhere.”
MMI is a Texas-based debt-counseling agency that has served more than 2.5 million consumers, with a focus on dramatically reducing interest rates on credit card debt.
In the past, typical MMI clients were in their 40s and 50s, “folks who are starting to think significantly about retirement,” Bulger said. Lately, however, counselors are meeting with many more consumers in their 30s.
“And that’s unusual,” Bulger said, “because that’s the time in your life when you typically don’t see as much credit card debt.”
High inflation and interest rates are driving up debt
Consumer debt has been rising in the pandemic years, an era of unusually high inflation and elevated interest rates. People owe more on their cars, student loans and credit cards.
In 2024, MMI saw a 35% year-over-year increase in overall demand for financial counseling, according to agency data. The average amount of unsecured debt held by those clients, excluding mortgages and car loans, now tops $30,000.
Over the pandemic years, agency officials say, millennials have emerged as the largest group seeking debt counseling at MMI, and by a wide margin.
Millennials who seek counseling have the highest car loan balances of any generation, topping $28,000 in many states, the agency says. Nearly half of millennial clients report financial hardship from credit cards.
'It was very dark for a while'
Ian Spigel-Blum, 34, came to MMI in 2023 with six-figure credit card debt. And to echo Bulger’s comments, the debt seemed to come out of nowhere.
Spigel-Blum works in the gaming industry. During the pandemic, he built up a lucrative side business selling trading cards: Pokémon, Magic: the Gathering, and the like. He did so well that he opened a store in the Virginia Beach region and put the expenses on credit cards.
Just months after he opened the store, Spigel-Blum lost his day job. The store was doing well, but not nearly well enough to replace the lost income.
“It was very dark for a while,” Spigel-Blum said. “I was paying $6,000, $7,000 a month, just in interest payments.”
The interest rates on his cards ranged from 17% to 25%. Debt counselors negotiated with the card companies and knocked them down to under 3%, on average. Now, Spigel-Blum is on track to repay the card debt within four years.
At one point, Spigel-Blum had actually suggested divorcing his wife just to get her clear from his debt. She refused. They just welcomed their first child.
Looking back, Spigel-Blum marvels at how quickly his finances went south, with credit cards he’d acquired online at the click of a mouse.
“I think my generation is just computer-savvy enough to be dangerous,” he quipped.
RICHMOND, CALIFORNIA - SEPTEMBER 06: A "We Finance" sign is posted at YG Auto Sales on September 06, 2023 in Richmond, California. Credit monitoring agencies are seeing a rise in defaults of credit card and auto loan payments as inflation continues to squeeze the pocketbooks of many Americans.
Rites of passage: A first home and a third-row seat
To some extent, rising consumer debt among millennials may reflect the life changes that come with entering your 30s and approaching your 40s. Many in the millennial generation are getting married, having children and purchasing first homes.
That last goal, at least, feels increasingly out of reach. With median prices topping $400,000, homeownership continues to elude nearly half of millennials. Two-thirds of millennials who seek debt counseling at MMI are renters.
In recent years, however, the millennial generation has fared remarkably well on many other measures of household finance.
A study by LendingTree, the personal finance site, found that millennials had a higher median net worth in 2022 than either Gen X or baby boomers reported at the same point in their lives. Millennials also had more cumulative earnings than older generations when comparing the cohorts at similar ages.
Prospective home buyers speak with a realtor during an Open House in a neighborhood in Clarksburg, Maryland on September 3, 2023. Homeownership feels increasingly out of reach for younger generations of Americans, who are squeezed by student debt and childcare costs in an era of slower economic growth.
'That generation has taken punch after punch'
The generation has come a long way, finance experts say, considering that many millennials entered the job market during the Great Recession of the late 2000s.
“That generation has taken punch after punch,” said Matt Schulz, chief credit analyst at LendingTree. “And now, millennials are aging into that space where they’ve got a couple of kids and a big three-row car that they need to take their kids to soccer practice and recitals. And they still have student loan debt.”
A 2024 report from LendingTree found that Generation X held the most non-mortgage debt, a median $33,859, based on a data from the 100 largest metropolitan areas. Millennials ranked second, with $30,558 in median debt. Baby boomers placed a distant third.
But newer data from the Federal Reserve suggests millennials, and thirtysomethings in particular, are carrying more debt now than a few years ago, especially by comparison with other age groups.
In the closing months of 2019, consumers in their 40s had the most total debt, $3.6 trillion, followed by Gen-X fiftysomethings ($3.3 trillion) and millennial thirtysomethings ($3 trillion), federal data show.
By the close of 2024, the generations had switched places. Fortysomethings still had the most total debt, $4.7 trillion. But now, thirtysomethings ranked second, with $4 trillion in debt. Fiftysomethings had fallen to third.
“We’re talking to people who never needed to live on a budget before,” Bulger said. “We’re talking to people every day who say, ‘I want to get married, but we need to take care of this debt first.’”
