Thanks to Student Debt, Millennials’ Net Worth Plummets

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Dealing with student debt after graduation is tough. High loan balances and monthly payments can make it difficult for you to make ends meet. They can even cause you to put off pursuing other goals, such as getting married or buying a home.

However, an updated report on the financial health of young Americans highlights how serious millennial debt has become. Young Invincibles, an advocacy group, found that young people with student loans have fallen far behind their parents’ generation when it comes to financial health.

Study results on millennial debt

In the report, the Young Invincibles compared the wealth of current 25- to 34-year-olds to the same age group in 1989. Millennials earned lower incomes, were less likely to own a home, and had a lower net worth than their parents’ generation.

One of the most important factors affecting millennials’ debt and net worth is student loans. When the organization looked at college graduates and subtracted their debt from their assets, it found that the group has a median net worth of -$1,900.

Students who graduated without debt had a much higher net worth, a median $99,000. But, what’s more surprising is how those who never got a college degree compare. Millennials without a degree have a median net worth of $7,900, putting them ahead of graduates with student loans.

Baby boomers, meanwhile, had much higher net worths at the same age. In 1989, the median net worth for 25- to 34-year-olds who had a college degree and debt was $89,143. That’s means their net worth was over $90,000 higher than for the same age group today.

millennials debt

Image credit: Young Invincibles

Why your net worth is important

Your net worth is the value of all your assets — such as your savings, retirement accounts, cars, or other valuables — minus your debt. It’s a better indicator of your financial situation than just looking at what you have in the bank or how much you owe.

A consistent increase in net worth, even if it’s a small improvement each month, is a good sign you’re on the right track. Having a positive net worth shows that you potentially have enough assets to cover some emergencies that might pop up. You might even be in a position to start saving for a home or even think about opening a business.

By contrast, if your net worth worsens over time, you might need to make drastic changes to get back on track. One emergency could wipe out what money you do have in the bank, and you might not be able to accomplish your financial goals.

4 ways to improve your net worth

If your net worth is negative or low, you can make changes now to improve it over time. Here are four ways you can boost your net worth:

  1. Pay down debt: If you have credit card debt, student loans, or auto loans, you can improve your net worth by paying down the balance a little each month. When you’re struggling to make ends meet, paying extra toward your debt might sound impossible. However, you can do so by launching a side hustle to earn more money or by directing every windfall to debt repayment.
  2. Boost your savings: Adding to your savings will help your net worth, too. Set aside a portion of each paycheck for your emergency fund. If your employer offers a contribution match, make sure you’re contributing enough to your retirement savings to take full advantage.
  3. Consolidate your debt: If you’re overwhelmed with credit card debt, consider consolidating your debt with a personal loan. You could qualify for a low-interest loan, which can help you pay off the debt faster and save money.
  4. Refinance your student loans: If your student loans are your largest burden, one option that can help is refinancing your debt. By refinancing, you work with a new lender to take out a new loan for the same amount as your old ones. The new loan could have a lower interest rate, smaller monthly payment, and a different repayment term. Although refinancing does have its drawbacks, particularly if you have federal loans, it can be a useful tool to help you pay off your debt sooner and save money. Find out how much you could save with our refinancing calculator.

Managing your student debt

Dealing with student debt can make it more difficult to get ahead, and it can negatively impact your net worth. However, by researching your options and coming up with a plan, you can start improving your net worth and financial health.

If you’re overwhelmed by student loans and don’t know where to start, sign up for our app for free assistance.

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.