- Gen Zers are taking on credit card debt — and missing their payments — at an increasing rate.
- We spoke to three of them about their financial challenges.
- Student debt, inflation and housing costs remain obstacles as a recession looms.
Anthony Strain was desperate for another roommate.
The 26-year-old from Pittsburgh is currently unemployed, owes $50,000 and arrears on his gas and electric bills. To create “financial leeway” and shoulder the $800 a month rent, Strain said he and his partner found someone else to move in with them and help them split the bills.
“We wanted this system to minimize the average cost of living per person here,” he said, adding that the trio split the cost of rent, utilities and subscriptions to streaming platforms.
Strain isn’t the only young American currently struggling financially. Credit card debt and late payment rates are rising, especially among 18-29 year olds. It comes as most economists are predicting a recession in 2023, as inflation is up 7.7% from where it was in 2021 and rents – although beginning to fall in some cities – remain high. It has prompted young Americans to take on more debt, find more roommates, and take on more jobs.
Of course, not all Gen Zers have problems. Americans ages 16 to 24 have seen wage growth of 13% over the past year – well above inflation of 7.7% over the same period – as companies have raised wages to attract workers. But if there is a recession, Generation Zers could be among the hardest hit due to rising debt, low savings and vulnerability to layoffs.
Those Insider spoke to don’t have much hope for the near future.
“We’re trying to hold out, but I don’t know if we’ll survive the winter unscathed,” Strain said.
“My generation and I will not have the same opportunities to build our future as our parents and grandparents did.”
Strain said that the more than two-year hiatus on student loan payments helped, but that he continues to struggle with personal loans and credit card debt.
“It’s gotten to a point where my payments cover the interest and not much more,” he said. “Both of my credit cards are maxed out, with one even exceeding the credit limit thanks to interest.”
According to the New York Fed, US credit card debt increased by a total of $38 billion between July and September of this year. The 15% year-over-year increase was the largest in over two decades. While overall arrears remain below pre-pandemic levels, all age groups saw an increase in arrears in the past quarter. Among older Gen Z members, the delinquency rate rose to over 6%, but is still below the pre-pandemic rate of around 9%.
“Is this simply a return to previous levels with forbearance ending and stimulus savings drying up, or is this a sign of trouble ahead?” New York Fed researchers wrote of the overall rise in missed payments.
A 24-year-old Californian, who asked not to be identified, told Insider she needs to “use up her life savings” to support herself financially while pursuing a master’s degree in finance in Paris.
She said she works as an intern but makes about $1,250 a month. She’s taken babysitting jobs to earn extra income, but even so, she said her bank account “goes to zero or below every month.”
She hopes that taking out a student loan for a master’s degree will pay off financially in the end, but she’s not very optimistic.
“Honestly, I don’t think any amount of education can save me or anyone else from what’s happening,” she said. “My generation and I will not have the same opportunities to build our future as our parents and grandparents did.”
Among 2019 and 2020 graduates, the average borrower had student loan debt totaling over $28,000. While the Biden administration’s student loan forgiveness plan could reduce the balances of some borrowers by as much as $20,000, the plan is currently on hold after opponents challenged it in court.
As a finance student, she knows she should start saving for retirement as soon as possible, but said doing so is challenging as spending and student loan payments weigh on her.
“I don’t know when I’ll even be able to save for retirement when I can barely support myself now.”
Laurence Kotlikoff, an economist at Boston University, previously told Insider that more than half of Gen Z could retire without sufficient savings due to savings problems and rising costs.
“At this point I can barely pull myself together to stay afloat”
Another Gen Zer, who asked not to be identified, told Insider that a few years ago they made over $50,000 through education and freelance programming gigs.
However, the 23-year-old said they have since been fired from the position that provided the bulk of their income and their financial situation has been slowly collapsing in recent years as a result. They are now over $20,000 in debt and between all of their expenses they said they were lucky to have $5 in their “checking account” at the end of the month.
“At this point I can barely pull myself together to stay afloat,” they said.
According to the NY Fed report, the average credit card balance of 18-29 year olds rose to about $2,000 in the third quarter, up from about $1,500 a year earlier, and rising prices are one reason. Inflation cooled slightly in October but remains well above the US Federal Reserve’s 2% target.
“I’m someone who got lucky, got a great job, followed sound financial advice, and did well,” said the General Zer. “And I got stung anyway.”
While unemployment rates remain low compared to historical levels, employers laid off nearly 1.4 million Americans in October and Strain, 26, is currently among the unemployed.
He works in the film and television industry, which he said is in a “quiet season” until spring. He has filed for unemployment benefits in the past but said last time he didn’t get his first check for six months, which has put him off trying again.
He has tried working for Amazon but said the company is cutting hiring and that he is having a hard time finding another job. His partner is employed, which has helped them cover short-term expenses.
“The pressure is great,” he said. “I am confident that I can find work soon and keep my courage. It’s going to be tough, but I have no choice but to stay determined. Many colleagues my age are in the same boat.”