The United States is very much a debtor nation. From the country’s governmental debt to personal debt, the numbers are sitting at staggering levels. According to a report released by the organization UBS, the nation’s consumer debt currently sits at around $3.6 trillion, that’s trillion. Even more alarming is the fact it continues to rise month after month, year after year.
At that level, the US debt sits at 20% of GNP, which is reaching levels that are unsustainable. A closer look at the number indicates that millennials (21 years old to 34 years old) are responsible for $1.1 trillion of the total consumer debt amount. The causes of millennial debt reaching such limits are two-fold, college debt and an inability to or unwillingness to live within their means.
The college debt issue is not new, yet is still threatens to undermine the stability of the US economy if not addressed in the immediate future. According to New York Fed President William Dudley, “continued increase in college costs and debt burdens could inhibit higher education’s ability to serve as an important engine of upward income mobility.”
As for consumer debt, recent improvement in the situation is becoming more apparent. As millennials find themselves facing unmanageable debt issues, they are beginning to address the root causes of their problems. While they tend to still want to overspend on big ticket items, they are learning the benefits related to frugality and waiting for the lowest and best prices.
One trend that warrants monitoring relates to auto leasing. According to the UBS report 32% of millennial are foregoing car purchases in favor of leasing. While it certainly offers a lower priced option for transportation, they are having to walk away from leases without a meaningful asset to show for their efforts. With student debt so high, something has to give.