Millennials are sinking under the weight of their debts, having added a record $3.8 trillion at the end of 2022. Here’s what’s driving the trend — plus 3 tips to get your head above water (2024)

In news that will come as no surprise to their boomer parents, millennials in their 30s are digging themselves deeper and deeper into debt.

And it’s not just due to their long-abiding love for avocado toast and bougie coffee — although both of these things have certainly become more expensive lately, thanks to inflation.

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Their demographic alone amassed nearly $4 trillion in debt in the fourth quarter of 2022, according to the Wall Street Journal's analysis of the most recent Federal Reserve Bank of New York data. This marks a 27% rise from late 2019 — the biggest jump of any age group — and it’s the fastest they’ve ever accumulated debt since the 2008 financial crisis.

The generational wealth gap is widening for these 30-somethings, and here’s why the occasional splurge at Starbucks isn’t to blame.

Debt rising for millennials in their 30s at a record pace

Household debt hit $17.05 trillion in the first quarter of 2023 — up $148 billion from the previous quarter — as consumers grappled with rising inflation and interest rates.

This rising debt load may help explain why many millennials in their 30s are now missing their credit card and auto loan payments at startling rates, according to the New York Fed.

A staggering 73% of U.S. millennials were scraping by paycheck-to-paycheck in the spring, according to data from finance and commerce research hub PYMNTS.com. Survey respondents in that age group cited debt payments and supporting dependent family members as the main drivers behind living that way.

And things keep popping up to set them back. Meanwhile, PYMNTS's June report found that millennials were dealing with more unexpected expenses than other generations. A significant 55% reported having at least one unexpected expense in the three months prior to being surveyed.

Then when you add in the fact that housing affordability is at its lowest level in history, these young(ish) adults face an additional hurdle to building wealth.

“We are seeing a ‘credit gap’ emerge in the sense that younger, less-affluent borrowers are coming under financial pressure from higher living costs and inflation outpacing their income gains,” Silvio Tavares, chief executive of VantageScore, told The Wall Street Journal.

“We aren’t seeing that among older and more affluent borrowers.”

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Mortgage bills

Millennials may be in their prime home buying years — but on top of the affordability crisis, they’re also currently contending with mortgage rates closing in on 7%.

Across all age groups in the survey, mortgage debt makes up the biggest share of outstanding balances — with that number rising by nearly $1 trillion last year, according to the New York Fed.

Although now may not seem like the best time to refinance your home loan, rates are expected to fall later in the year — so you’ll want to keep an eye out for the chance to slash your monthly expenses or the lifetime cost of your loan.

Auto loans

Aside from drivers in their 20s, this age group is also missing the most auto loan payments, says the New York Fed. Millennials as a whole currently make up the largest demographic of car buyers in the U.S.

Before buying a new set of wheels, make sure you’ve done the math and budgeted accordingly, and stay away from predatory loan rates. With a strong credit score, you could land a rate of between 6% to 8%.

But the best way to ensure you save on your car-related expenses is to shop around for the cheapest rate on insurance — close to half of American motorists saw their premiums spike up in 2022.

Credit cards

Borrowers in their 30s are struggling with the highest credit card delinquency rates, according to the New York Fed — surpassing pre-pandemic norms now. That’s a massive shift from the peak pandemic times, when many consumers used all that cash they saved from not dining out, traveling or commuting to work to pay down debt.

With the average credit card interest rate is sitting at 20.82%, it's no surprise paying down their balances is increasingly a struggle for many Americans. But when you don’t pay your bill on time, any late fees combined with that higher interest rate only make it harder to chip away at that debt — and you risk harming your credit score as well.

If you’re juggling multiple credit accounts (and interest rates) at a time, it might be helpful to consolidate them into a single loan, so you’ve got just the one bill to keep track of and one interest rate to worry about each month.

Of course, to make sure you're getting the best rate possible, you can't just sign up for the first loan you find. Experts typically recommend comparing at least three to five different offers before settling on a loan. That might sound like a time-consuming task, but these days some platforms take all the stress out of shopping around. With just a few clicks of your mouse, you can see all the lenders who are willing to help pay off your credit cards with a single personal loan — and it only takes two minutes.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.