How Millennials Ended Up in Debt—and How They Can Get Out of It

A millennial-aged woman using an ATM

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It’s no secret that millennials have debt. In fact, millennials are responsible for $1.1 trillion of the $3.6 trillion consumer debt in the U.S.

A big part of that? Student loan debt. The average millennial graduated with $40,200 in student loan debt. Add to that rising home mortgages, lower salaries, and even greater reliance on ongoing services for things like transportation and entertainment. Here’s what accounts for millennials’ debt—and how they can get out of it.

Student Loan Debt

Student loan debt is a huge part of the millennial debt load, so much so that 34 percent of millennials making above $75,000 say they doubt they will ever be able to repay their student loans.

Studies have also shown that student loan debt is a major factor in declining homeownership.

The Gig Economy's Shortcomings

The so-called gig economy is in full swing—and it’s estimated that approximately 3 in 10 adults take part in an independent work setup. Millennials are no exception to this trend. While this can be a great option for those having trouble finding long-term employment, or those who would prefer to work a side gig as a means of supporting another passion project or entrepreneurial endeavor, it’s not without its downfalls.

Many, if not all, side gigs do not offer traditional workplace benefits like health insurance, retirement savings programs, paid sick or maternity leave, or even perks like tuition reimbursement or free lunches. While these may seem like a small price to pay for the freedom to pursue one’s passion while also paying the bills, they can cost you big long-term.

Sticking It to Student Loans

While the outlook may seem dire for millennials, there is hope. Many millennials struggling with student loan debt are eligible for payback options based on their current salary, which could help them maintain a more realistic budget until they are able to increase their earning power.

Many professions also offer government student loan forgiveness after a certain number of years, regardless of the balance owed. These are great options for those struggling with student loan debt.

Finding a Workable Budget

When dealing with short-term debt like credit card debt, millennials should try to stick to a traditional budget and should avoid using credit cards as a backup to pad a monthly budget that is simply beyond one’s means.

If the pen-and-paper or Excel versions of a budget aren’t working, an online budgeting platform like Mint, Wally, or You Need a Budget are three good alternate options.

Living rent-free with family or with roommates in a low-cost apartment or house are other ways to quickly pay off debt.

Other Considerations

As for other, distinctly millennial money struggles (think: the side gig economy’s downfalls and cost of transportation and entertainment), there are creative ways to find both a fiscally responsible and workable solution.

For example, if one does not have access to a traditional 401(k) with matching options from an employer, that doesn’t mean he or she should skip saving for retirement altogether. Rather, setting up a Roth IRA or Traditional IRA is an alternative. Just be sure to set up a recurring contribution each month, as well as invest the funds promptly and intelligently in order to maximize earnings.

As far as the cost of entertainment and transportation, public transportation is likely the cheapest option. If public transportation isn’t available, ride-sharing options like Uber Pool are a cheap alternative, as well as carpooling with friends or coworkers, or even biking. For cheap entertainment options, try cutting the cord on cable and using a cheaper subscription service like Netflix or Hulu instead. 

While being a millennial in today’s economy isn’t easy, implementing the above tips can help set up a path to financial security, and eventually, prosperity.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Financial Finesse. "2017 Generational Report," Page 7.

  2. "Student Loan Debt by Age."

  3. Filene Research Institute. "Gen Y Personal Finances: A Crisis of Confidence and Capability," Page 13.

  4. Federal Reserve. "Consumer & Community Context," Pages 2-6.

  5. Federal Reserve System. "Report on the Economic Well-Being of U.S. Households in 2017 - May 2018."

  6. Federal Student Aid. "Income-Driven Repayment Plans."

  7. Federal Student Aid. "Public Service Loan Forgiveness."

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