Wednesday, 18 January 2017
A new study has revealed that the financial security of Americans, aged 18 to 30, is much worse than official numbers show.
American millennials are often portrayed as financially irresponsible, with no savings and no desire to save, so saying their net worth is low is hardly news. However, the situation is much worse than originally thought, as, on average, the net worth of the American millennial is now thought to be well below zero.
A study conducted by Robert Farrington, founder and editor of The College Investor, a personal finance site, claims that the average US millennial’s net worth is about —$17,612, indicating that Americans between 18 and 30 owe $17,612 more than they have in their assets (including cash and property).
The study divides millennials in groups by age, revealing that only those age 30 and higher (up to 35) have a positive net worth. The Wall Street Journal, citing research by the Federal Reserve’s Survey of Consumer Finances, claims that the median net worth of millennials is $10,400, but this survey omits negative net worth data, Farrington says. The primary reason for negative net worth figures is student loans, writes Economical Millennial .
Loans are easily accessible for students, and universities are constantly raising rates because those loans are so easily accessible, resulting in students joining a debt bubble similar to that of the housing crisis of the late 2000s, but a bubble which cannot pop, as one cannot claim bankruptcy on a student loan.
During the 2016 presidential campaign, both candidates addressed the student loan issue. President-elect Donald Trump advocated that student loans should be taken away from federal government, privatized, and given to local banks.
“Education should be local and locally managed,” he said on January 11. Trump also proposed capping borrower repayment to what he called an affordable portion of income, naming a figure of 12.5 percent of borrower’s income on October 13, 2016. The President-elect also mentioned the possibility that a student loan could be liquidated, if the borrower pays off debt regularly for a period of 15 years.
“And if borrowers work hard and make their full payments for 15 years, we’ll let them get on with their lives,” he said. “[student loan] debt should not be an albatross around their necks for the rest of their lives.” In Russia, student loans are provided by one of the country’s largest banks, Sberbank, have a fixed interest rate of 7.5 percent, and the loan must be paid off 10 years after the student graduates. Monthly payment is not bound to a borrower’s income.