Despite common criticisms pointed at millennials, the source of their money stress isn’t indulgences like lattes and avocado toast.
According to a new Student Loan Hero survey, 39 percent of millennials say too much debt is the number one source of money stress. What’s more, about two-thirds of millennials never learned how to handle debt.
The survey also reveals that millennials may not be aware of several options for repaying and managing student loans. While there are likely solutions for millennials struggling with student debt, they aren’t always obvious.
This survey set out to find the money challenges that millennials are struggling with and stressing about the most. It also explores whether millennials feel equipped to solve financial problems and overcome money stress.
Two-thirds of millennials never learned how to handle debt
Only a quarter (27 percent) of millennials say they weren’t taught about central financial topics as a child or teenager. About half (54 percent) say they were taught about budgeting, specifically. This means a majority of millennials start out with some financial literacy as adults.
However, other money lessons were less common:
- More than two-thirds (69 percent) of millennials weren’t taught how to handle debt.
- Only three out of five (59 percent) millennials say they were taught about setting up emergency funds or short-term savings.
- 71 percent of millennials learned nothing about saving for retirement.
- Four out of five (81 percent) millennials say they didn’t learn about investing early on.
Although millennials may not have learned much about saving for retirement or investing when they were younger, they can teach themselves by reading up on a certain topic or following a money podcast.
Where do millennials go for advice about money?
- About half (48 percent) of millennials rely on family for financial advice.
- 25 percent of millennials rely on the internet.
- 24 percent seek money advice from friends.
Interestingly, 43 percent of millennials say they are not comfortable discussing financial matters with friends.
Overall, millennials have learned most of the basics of finance. For instance, they know they should follow a budget and try to save when they can. But following through is a lot trickier for them. The top sources of money stress for millennials gives insight into why.
Debt is the top money stressor for millennials
Most millennials feel they have too much debt, struggle to manage a budget, and can barely keep up with living expenses. Millennials’ top money stressors underline that this generation feels they have too many demands on their money, and few funds left over to save.
When asked, “What stresses you out about money?” millennials responded with the following (with the option to choose more than one answer):
- 39 percent say too much debt.
- 29 percent say managing a budget.
- 29 percent say affording rent and other necessities.
- 20 percent say the fear of making mistakes or acting on bad advice.
- 16 percent say not knowing their financial options.
- 10 percent say understanding credit.
Additionally, around a quarter selected “none of the above.” This could indicate that those respondents are either not stressed about their money or their top stressor was not among the answers provided.
Credit card debt and student debt are biggest sources of stress
Although debt is the leading source of financial stress for millennials, not all debt is created equal. Here are the different types of debt millennials find most stressful:
- Credit card debt: 27 percent
- Student debt: 25 percent
- Medical bills: 16 percent
- Mortgage: 12 percent
- Car loan: 11 percent
- Payday loan: 3 percent
Credit card debt can be the most expensive type of debt and takes the longest to repay. While other forms of debt usually have installments, credit card debt minimums are set low and readjust each month. In fact, $10,000 in credit card debt could take as long as 28 years to repay, according to a calculation from Credit.com.
Plus, while millennials are a younger and likely healthier cohort overall, one in six (16 percent) struggle with paying medical debts. Additionally, a third (34 percent) of respondents don’t seem to view debt as a source of money stress and chose “none of the above.”
Student debt prevents millennials from making major life decisions
For millennials with student loans, 61 percent surveyed say these loans are their most stressful type of debt.
- Meanwhile, 39 percent of these millennial student loan borrowers say the cause of their stress is the idea of being in student debt for so long.
- Subsequently, 31 percent are most stressed by the size of their student loan balance.
Another third of millennial student loan borrowers are about equally stressed out by these factors:
- 11 percent stress about their student loan interest rate.
- 10 percent stress about their monthly payment amount.
- 9 percent feel stressed because they feel they have no options.
Student debt also holds back millennials from taking important life steps. When asked what they would do if they had no student loans, here’s what respondents chose:
- 41 percent would buy a home.
- 35 percent would take a vacation or travel.
- 8 percent would start a company.
- 6 percent would have a baby.
- 6 percent would get married.
Although homeownership is the most common life step millennials are putting off due to student debt, it doesn’t have to be. Many millennials could both qualify for and afford a mortgage alongside student debt — if they are willing to make other financial sacrifices.
Millennials don’t always know their student loan options
Millennial student loan borrowers surveyed often feel stuck and stressed about repayment. However, they have some idea of what their student loan options are and say they have considered the following:
- Income-driven repayment (IDR) plans: 39 percent
- Student loan forgiveness: 31 percent
- Deferment or forbearance: 31 percent
- Refinancing student loans: 24 percent
- None of the above: 25 percent
But, while most millennial student loan borrowers had considered at least one of these options, they might not be aware of all their choices:
- A full quarter of millennial student loan borrowers haven’t considered any of the repayment options listed in the survey.
- Three-quarters (76 percent) of millennials surveyed have not looked into refinancing student loans.
- Two-thirds (61 percent) have not considered an IDR plan, even though it could help with managing a high balance.
Millennial’s biggest money challenges are in everyday management
Overall, the survey underlines that millennials were taught about money and have a strong foundational understanding of finances.
However, they are still facing common money stresses over their debts, budgets, and expenses. Many millennials feel it’s too difficult due to balance high debt payments with various living expenses or other financial goals.
So what can millennials do about this? With their highest earning years still ahead of them, they can focus on growing their income. With more income, debts and expenses become more affordable.
Additionally, millennials should play to their strengths of a strong financial literacy foundation. Millennials who continue to explore debt repayment strategies and improve their financial behaviors will ultimately be able to minimize their money stress in the long run.
Methodology: Student Loan Hero gathered the above results through a Google Consumer Survey conducted on May 7, 2017. The survey collected respondents from 1,001 millennials ages 22-37, to capture those over college-age. We also looked at a subset of 400 millennial respondents with student loans. Survey responses have margins of errors of up to 3 percent.
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
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2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
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|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|