Jim Liebelt's Youth Culture Watch

Today's Young Adults Will Never Pay Off Credit Card Debt

A growing body of evidence suggests that today’s young adults are drowning in credit-card debt — and that many of them will take this debt to their graves.

More than three-quarters of renters between the ages of 18 and 24 spend more than they earn every month, according to a survey of 1,000 renters (of all ages) by Rent.com. This is the case even though 17% of respondents in that age bracket say they’re willing to live with roommates to save money.

More than 20% overspent their income by more than $100. That’s every single month. And since they haven’t built up their credit histories yet, it’s a safe bet that these young adults are paying relatively high interest rates on the resulting credit card debt.

Although more young people than older adults blame “socializing” as a barrier to saving money, most young people aren’t knocking back $20 drinks in trendy lounges. They’re struggling with much more prosaic financial demands. For 42%, rent is their top expense, while 18% say transportation costs eat up the biggest chunk of their earnings and 22% say paying for food eats up the greatest share of their monthly budget.

To a disturbingly large extent, the young and the broke are relying on credit cards to make it until their next payday.

A new study out of Ohio State University found that young adults are racking up credit card debt at a more rapid rate than other age groups, and that they’re slower at paying it off. ”If what we found continues to hold true, we may have more elderly people with substantial financial problems in the future,” warns Lucia Dunn, co-author and professor of economics at Ohio State University. “If our findings persist, we may be faced with a financial crisis among elderly people who can’t pay off their credit cards.

People born between 1980 and 1984, for instance, already have an average of $5,689 more in credit card debt than their parents did at that age.

Along with more debt, this age cohort is paying off those debts at a sharply lower rate than their parents. Dunn says a lot of these young people are never going to get out from under their credit card debt. “Many people are borrowing on credit cards so heavily that payoff rates at these levels are not sufficient to recover their credit card debt by the end of their life, “ she writes in the study. “We can expect more people to carry credit card debt at death, which could have loss implications for the credit card issuing banks.”

Source: Time
http://business.time.com/2013/01/17/todays-young-adults-will-never-pay-off-their-credit-card-debts/

Black Friday Sales Online Top $1B for First Time

Black Friday retail sales online this year topped $1 billion for the first time ever as more consumers used the Internet do their early holiday shopping, comScore Inc said on Sunday.

Online sales jumped 26 percent on Black Friday to $1.04 billion from sales of $816 million on the corresponding day last year, according to comScore data.

Amazon.com was the most-visited retail website on Black Friday, and it also posted the highest year-over-year visitor growth rate among the top five retailers. Wal-Mart Stores Inc's website was second, followed by sites run by Best Buy Co., Target Corp. and Apple Inc, comScore noted.

Digital content and subscriptions, including e-books, digital music and video, was the fastest-growing retail category online, with sales up 29 percent versus Black Friday last year, according to comScore data.

E-commerce accounts for less than 10 percent of consumer spending in the United States. However, it is growing much faster than bricks-and-mortar retail as shoppers are lured by low prices, convenience, faster shipping and wide selection.

ComScore expects online retail spending to rise 17 percent to $43.4 billion through the whole holiday season. That is above the 15 percent increase last season and ahead of the retail industry's expectation for a 4.1 percent increase in overall spending this holiday.

Source: Reuters
http://www.reuters.com/article/2012/11/25/net-us-usa-retail-blackfriday-online-idUSBRE8AO08C20121125

Student Loan Debt Hits Record High

The average college student who graduated in 2011 had $26,600 in student loans, according to a new report, which estimates two-thirds of last year’s college graduates had student loan debt.

The average debt is the largest since the Institute for College Access and Success began compiling the figures in 2005, and it comes amid soaring college costs, record loan defaults, and a persistently difficult job market for college graduates.

While unemployment among college graduates is only slightly higher than the overall rate, the study found a stunning 37.8 percent of recent graduates are working in jobs that do not require a college degree. The study said that means wages are depressed, making the situation for graduates even more difficult.

The report cites recent U.S. Department of Education Data which show the federal student loan default rate at its highest level in 14 years. The New York Federal Reserve recently reported more than five million student loan borrowers have at least one loan past due.

Source: NBC News
http://bottomline.nbcnews.com/_news/2012/10/18/14535163-student-loan-debt-hits-record-high-study-shows

2012 Back-to-School Spending Expected to Increase by $15 Billion

Parents aren't the only ones happy kids are headed back to classrooms -- so are retailers. That's because after several years of lackluster results, back-to-school spending is rebounding in a big way.

Combined back-to-school and back-to-college spending is expected to hit $83.8 billion, up double digits from a year ago, according to the National Retail Federation. Last year the NRF estimated spending to be $68.8 billion.

The spending boost comes even as 85% of consumers say the state of the economy will affect their spending this season.

"The desperation is gone, and it's not as nostalgic as it was a few years ago," said Mike Gatti, a senior VP at the NRF. "Retailers are feeling pretty good and are coming out with new strategies."

Retailers have Mom and Dad to thank for the boost, of course, but more kids are also dipping into their piggy banks this season. According to the NRF survey, 43% of teens and 32% of pre-teens will spend their own money on back-to-school items, compared with 38% and 24%, respectively, a year ago.

A significant decline in teen spending was one of the hallmarks of the recession. Teens account for $125 billion in spending annually, with the average teen shelling out $5,000 a year at favorite stores and restaurants. But tight-fisted teens caused spending on categories from apparel to beauty and food to concerts to fall by double digits in the depths of the recession. Analysts say there are now concrete signs that the lucrative teen category is bouncing back.

Source: AdvertisingAge
http://adage.com/article/news/back-school-season-expected-hit-83-8b/236528/

The "Not So Empty-Nest" - Adult Kids Find There's No Place Like Home

Adult kids find that there's no place like home when their finances are in a tailspin or their relationships fizzle.

According to a new detailed analysis, the number of young adults ages 20 to 34 who live with their parents has jumped from 17% in 1980 to 24% in 2007-09.

The rise was sharpest among those under 25 — a new high of 43% vs. 32% in 1980 — but it increased largely across the board. Even among 30- to 34-year-olds, nearly one in 10 lived with parents.

"This 'Great Recession' has had tremendous effects that previous smaller recessions did not," says Zhenchao Qian, a sociology professor at Ohio State University and the author of the report for the US2010 Project, which studies trends in American society.

Financial insecurity, coupled with massive student loan debt, has exacerbated another trend that might encourage some to live with their parents: delaying marriage and postponing having children.

"This is a case of families adapting to difficult circumstances," says Paul Taylor, director of the Pew Research Center's Social & Demographic Trends project. "Family is the ultimate social safety net."

Many also return to their parents' homes when marriages end. Among 30- to 34-year-olds who live with their parents, 20% are divorced.

Source: USA Today
http://www.usatoday.com/news/nation/story/2012-08-01/boomerang-adults-recession-kids-at-home/56623746/1

Parents Paying Less of Students' College Tuition, Fees

College students are increasingly paying for their own higher education, according to a new study from college financing company Sallie Mae. The company, which teamed up with Ipsos Public Affairs, released its annual “How America Pays for College” report recently. Among the key findings are that the current crop of college students are responsible for paying larger shares of their education, while their parents are picking up smaller portions of the tab.

Also, more families are ruling out schools that are out of their price ranges.

By factoring in their savings, income and loans, college students are covering 30 percent of the total cost of attendance, the survey shows. Their peers four years ago carried about 24 percent of the cost. Meanwhile, parents are covering 37 percent of the costs of college, down from 45 percent four years ago.

The survey also shows that 69 percent of families said they had eliminated certain colleges from their search based on cost, which is up from 56 percent in 2009.

Fifty percent of parents and 66 percent of students said they’ve reduced their spending to have more money to pay for college.

Source: LoanSafe.org
http://www.loansafe.org/study-parents-paying-less-of-students-college-tuition-fees
 

Gen Z Learns From Parents' Money Mistakes

Generation Z - young people between the ages of 13 and 22 - are learning to handle money by watching their parents struggle through a difficult economy.

A new survey from TD Ameritrade reports that these young people are already saving money ($300, on avearge) and are focused on big financial questions, such as how to afford college.

Why are these young people already taking on such weighty financial issues? The answer seems to be that having come of age during the financial crisis, they were exposed early to the importance of learning how to manage money.

TD Ameritrade reports that generation Z has watched their parents struggling to pay back student loans, which in turn taught them how much of a burden those loans can be. Almost six in 10 parents of generation Z reported taking out student loans, and 43 percent continue to pay them back today. At the same time, about half of those parents are also saving for their own children’s future college educations.

Seeing their parents deal with the difficult economy seems to have had a positive overall effect: Three in four young people said they think saving money is important, and four in ten said they have a budget, which they follow closely. Over half of generation Z respondents surveyed said they would save an extra $500, with an additional 11 percent reporting they would put it toward college costs.

Still, the news isn’t all good. Credit card problems are already cropping up among the 13-to-22 crowd. Among those who have a credit card, over half have carried a balance for over six months, which means racking up interest and more debt, and fewer than one in four routinely pay off their cards each month. Many young people don’t yet have their own savings or checking accounts, which can help them learn how to save and manage accounts.

Not surprisingly, parents played a pivotal role: The better budgeters were more likely to have parents who talked about money with them. Parents, reports TD Ameritrade, “are still the most influential variable when it comes to educating children on basic financial skills.”

Source: U.S. News & World Report
http://money.usnews.com/money/blogs/alpha-consumer/2012/06/20/kids-learn-from-parents-money-mistakes

Kids: Now More Expensive Than Ever

A new report from the U.S. Department of Agriculture finds the cost of raising kids from birth to age 17 has increased by $8,000 in the last two years. This brings the total to a whopping $235,000 for middle-income Americans.

In calculating the cost of raising kids, the USDA considers expenses for everything from housing and food (the two biggest expenses) to education, health care, clothing, transportation, and so on. The estimates for this year are 3.5% higher than those from last year, mainly due to increases in the costs of gas, food, education and child care.

Because the USDA focuses only on the expenses up to age 17, their estimates leave out one gigantic contributor to the cost of raising kids: college education. As every parent knows, these are considerable.

Source: Time
http://business.time.com/2012/06/15/kids-now-more-expensive-than-ever/

How Much Will College Cost?

The price of attending college is rising at a fast rate. Here's a look at estimated tuition costs for students beginning college in 5, 10 and 18 years from now.

Starting College in 5 Years:
4 Year Public School - in State - $81,000.
4 Year Public School - Out of State - $118,000
4 Year Private School - $174,000

Starting College in 10 Years:
4 Year Public School - in State - $114,000.
4 Year Public School - Out of State - $166,000
4 Year Private School - $245,000

Starting College in 18 Years:
4 Year Public School - in State - $195,000.
4 Year Public School - Out of State - $285,000
4 Year Private School - $420,000

Source: 529s.com
http://529s.com/college-cost-calculator.html

Student Loan Debt on the Rise

Debt from educational loans in the U.S. rose 3.4 percent to $904 billion in the first quarter, according to the Federal Reserve Bank of New York.

Outstanding student debt increased from $874 billion three months earlier, the New York Fed said today in a report. The total includes loans that are backed by the U.S. government as well as private borrowing by students and their parents.

Student-loan debt surpassed credit-card debt in the second quarter of 2010. In the year ended March 31, outstanding student debt rose by $64 billion from a year earlier, while all other forms of household debt fell a combined $383 billion, according to the report.

“Student loan debt continues to grow even as consumers reduce mortgage debt and credit card balances,” Donghoon Lee, senior economist at the New York Fed, said in a statement accompanying the report. “It remains the only form of consumer debt to substantially increase since the peak of household debt in late 2008.”

Source: Bloomberg
http://www.bloomberg.com/news/2012-05-31/student-loan-debt-rose-to-904-billion-in-first-quarter.html