Dartmouth Study Examines Young Adult Debt Across Early Baby Boomers, Late Baby Boomers, and Generation Y

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Burden of Debt Increases; Unsecured Debts and Student Loan Debt Replace Home Mortgage Debt Among Generation Y Representing Shift in Young Adult Debt Portfolios


September 8, 2014

Young adults’ debt portfolios and debt burden (debt relative to economic resources) have changed dramatically across three generations of young adults, according to a study by Jason N. Houle, assistant professor of sociology, published in the journal Social Problems.

Houle explored differences in debt across three generations (or cohorts) of young adults: Early Baby Boomers in the 1970s, Late Baby Boomers in the 1980s, and Generation Y in late 2000’s. These generations of young adults came of age in very different historical contexts that impacted their debt and credit use. Most importantly, Generation Y young adults have much greater access to credit than did previous generations of young adults, in part due to deregulation and the expansion of credit markets.

Moreover, the social roles, norms, and expectations of young adulthood have also changed, and young adults today are now taking longer to settle into traditional adult roles, such as marriage, parenthood, and home ownership. Contrary to Early Baby Boom adults of the 1970s, when young adults were apt to get a full-time job, get married, start a family and purchase a home, all within the backdrop of a strong economy and high wages, young adults of Generation Y have been less apt to settle into these adult roles in such a quick succession, as a greater proportion of young adults have gone on to college and extended their education.

The study revealed three key findings:

  • Debt burden—or debt relative to income and assets—has increased dramatically across generations, and is especially high for Generation Y young adults. Thirty-five percent of Generation Y young adults have debts that exceed the value of their assets, compared to 16 percent of Early Boomers and 17 percent of Late Boomers.

    “The extremely high debt burdens among Generation Y young adults suggests that debt will be much harder for them to repay than previous cohorts,” said Houle.
  • The types of debt that young adults take on has changed over time. Across cohorts, student loan debt has replaced home mortgage debt as the primary form of wealth-building debt. Credit card debt has also become a more visible part of the household balance sheet.

    “As young people have extended their education and delayed family formation and entry into adult roles, they have moved away from debt that signals entry into traditional adult roles, such as home ownership, and toward debt that signals the evolving needs of young people and rising access to credit, like student loan and credit card debt,” added Houle.
  • Against a backdrop of rising inequality, changes in debt across generations have varied across social class lines. Across cohorts, young adults from less advantaged backgrounds (low income, less educated parents) and those who lack a college degree are disproportionately taking on unsecured debt (the kind that isn’t tied to an asset like a house or a car). Meanwhile, across cohorts, college-educated youth and those from more advantaged social class backgrounds have taken on more wealth-building debt, especially education loans. This growing disparity in debt portfolios suggests that, in the latest generation of young adults, the more advantaged are able to take on debt that helps them pursue a middle class lifestyle and build their wealth, while the less advantaged must take on debt to pay their bills and keep their heads above water.

For the study, Houle drew from Bureau of Labor Statistics data obtained from four nationally representative longitudinal surveys of young adults.

Assistant Professor of Sociology Jason Houle is available to comment at jason.houle@darmouth.edu or (814) 876-0244.