Millennials owe a record amount of debt, and it could become a huge drag on the economy

pulse

April 29, 2017 4:26 PM

Student and auto debt has offset a drop in mortgages, leading to an estimated $1.1 trillion of $3.6 trillion U.S. consumer debt being held by millennials.

Occupy Wall Street demonstrators protest against the rising national student debt in New York City.

US consumer debt is approaching a record 20% of GDP, and millennials owe most of it.

Millennials — 21 to 34-year-olds — hold an estimated $1.1 trillion of the country's $3.6 trillion in consumer debt, according to UBS, as rising student and auto loans outweigh a drop in mortgages.

And all that rising debt is coming with rising default risks. A UBS evidence lab survey found that 52% of people worried about defaulting on any loan over the next 12 months were in the 21 to 34 age group.

That's not good news considering those same individuals are meant to be the largest source of spending on big-ticket purchase items like houses and cars over the next year (see the chart below).

There is already evidence that millennials are changing their spending habits on smaller items where,

of millennials opting to lease in 2016, up from 21% in 2011, according to a January report from Edmunds. Among households making $50,000 or less, millennials made up 21% of lessees (the largest of any age group).

Should delinquent car payments become an issue because already-squeezed millennials choose to pay student loans first, lower-credit-score applicants could have a hard time financing car purchases. If that happens, automakers could be hurt.

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