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Closing the Gap on Gen Y's Debt Crisis
It's not that Gen Y is without their share of good traits-they're tech savvy, civic-minded, culturally diverse and generally more optimistic than their more cynical Gen-X precursors-it's just that they seem to have problems budgeting.
Recent reports from public policy research group Demos indicate as much as 75 percent of 18 to 24-year-olds carry a credit card balance, due in large part to aggressive marketing by credit card companies on college campuses.
Credit card debt among this age group has shot up dramatically—104 percent since 1992 to $2,985—and a study by student loan agency Nellie Mae found college seniors in 2001 were graduating with an average of $3,262 in credit card debt.
“It's stupid,” says Ron Blue, president of the Christian Financial Professionals Network. “The materialistic side of our culture says, 'You deserve a break today ... you only go around once, grab all the gusto that you can.' Our young people are confronted with needs-exposed through advertising-which they didn't even know they had.”
Jeff Anderson, local director of the Northeastern Oklahoma division of Crown Financial Ministries, concurs. “Credit card companies are now marketing to high school students. The problem is they're hitting people at a time when they have no income to service the debt.”
According to Blue, credit card overspending is often just a symptom of deeper underlying issues-discontent, greed, envy, and so on. “Teens are particularly susceptible to this,” he says, “so when they go to college and they're offered all these credit cards, they have no idea what it means or how to use them. They're probably not trained. Parents mishandle credit themselves, so the kids just do what mom and dad did.”
Adding to this dilemma, student loans are taking another big bite out of the average Gen-Y personal budget. Since the '80s, college tuition at four-year public schools has been steadily increasing, jumping 13 percent in 2003 (the first double-digit increase in a decade) and another 10 percent last year, according to the College Board.
Gen Y is the first generation to really bear the weight of college expenses through loans instead of grants and other financial aid. This, combined with credit card debt, is leaving cash-strapped college grads in bleak financial situations ... often ending in bankruptcy.
The Chicago Tribune recently reported that 111,000 adults age 25 and under will file for bankruptcy this year, according to a projection by Harvard University bankruptcy expert Elizabeth Warren. For these people, obtaining a mortgage or a car loan is often problematic. Those fortunate enough to get a loan are likely to be saddled with higher interest rates.
According to Anderson, many students begin digging deep financial holes for themselves early on, taking out loans while in college to buy non-school-related goods. “They're buying cars, furniture, stereos ... They're financing their lifestyle with college loans,” he says.
Anderson sees a correlation between increasing personal debt across the nation and decreasing tithing and church donations.
“Each generation is becoming less and less generous with their money in respect to giving to the Lord,” Anderson says. “It's gone from being a strong fabric of Christian existence for the older generations, to being completely optional in the minds of many people nowadays. The increasing debt trend is running parallel with this decreasing giving trend.”
Those who have already sped down the fast track deep into Debtville, however, shouldn't lose hope. Regaining control of personal finances is simply a matter of making an immediate U-turn. Eliminating debt involves a series of straightforward, but challenging tasks.
“Step number one is to just stop ... stop going further into debt,” Blue says.
“That seems so obvious,” Anderson says. “But sometimes I think people get deer-in-the-headlights syndrome. They think, 'Well, I'm already in trouble, so what's some more damage gonna do to me?'”
Blue continues, “You need to ask yourself: 'How did this happen? What was motivating me to do this? Was it just ignorance, or was it some underlying spiritual problem that I need to deal with?' Step number two is to develop a budget and a repayment plan. That's going to take discipline and it's going to take time ... and it's painful, which is why most people don't do it. Step number three: hold yourself accountable to someone to stick to your budget.”
Most importantly from a spiritual perspective, however, is to change your overall perception of credit card spending and debt in general, to question your true motivations behind purchases.
“Culturally [debt] is the way to get everything we want,” Anderson says. “But Scripture strongly discourages debt. It's becoming more and more critical that we live counterculturally in this regard.”
By freelance writer Jarrod Gollihare.
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