College Debt Leaves Generation X Grads Less Wealthy Than Parents

September 18, 2014 | By Jeanna Smialek

Most college-educated 30- and 40-somethings earn more than their parents did at the same age, yet they’re saving less. Student debt is partly to blame.

While 82 percent of Generation X Americans with at least a bachelor’s degree earn more than their parents did, just 30 percent have greater wealth. A smaller share of workers without college education -- 70 percent -- have surpassed their parents’ incomes yet almost half had higher wealth, according to a Pew Charitable Trusts report released today.

Lackluster saving among the cohort, those born between 1965 and 1980, has come as student-loan balances persist into middle age. Generation X’s financial straits could come with economic aftershocks, making it difficult for parents to afford college for the next generation and forcing workers to hold onto jobs longer or lower their living standards as they age.

“They may not be financially secure as they approach retirement,” said Diana Elliott, research manager at Pew’s Economic Mobility Project. “To the extent that Gen Xers are still paying student-loan debt, don’t have the wealth accumulated to invest in themselves, they also don’t have that money to invest in their children.”

Pew researches used Panel Study of Income Dynamics data spanning 1968 to 2011 to follow parent-child pairs through part of their economic life cycle.


Generation X trails their parents when it comes to wealth building, though they earn more.

College graduates in Generation X have far more debt than their peers without degrees, the study found. A typical degree holder who earned more than his or her parents had $13,000 in debt in 2011, more than double the $6,000 in debt held by those with less education.

Student Loans

While credit cards also played a role, student loans are a big contributor to that debt load: Four in 10 upwardly income-mobile college grads hold education debt, with a median balance of $25,000, according to the Pew report.

College graduates tend to come from families with more wealth, so they have a higher bar for surpassing the prior generation than those with lesser education, the report notes.

Overall, three-quarters of Generation X households had family incomes higher than their parents did after adjusting for family size, the Pew report found. Even so, just 36 percent had exceeded their parents’ wealth.

The typical household had $5,000 less wealth than their parents did at the same age, once debts were subtracted from assets.

Less Wealth

Erica Allen owes far more than her mother ever did and holds less wealth, even though she earns more. The 43-year-old from Blythewood, South Carolina, has $40,000 in student loans after studying at Winthrop University in Rock Hill, South Carolina. She’s racked up another $20,000 in education debt for her son, a 22-year-old college senior.

“It’s really been awful,” said Allen, who gave up her studies in 2008 to work at Verizon Wireless as a global technical support coordinator. She lives with a roommate to save on rent and drives a 1999 Chevrolet Cavalier that she bought for $900, because she can’t afford a car payment. “I have two garnishments from student loans, and that’s 15 percent of my income. That’s substantial.”

The student loans dragging on Allen’s wealth underscore a new reality in U.S. higher education.

“As the costs that students and families are expected to cover outpace family incomes and available grants, student loans have become and more and more of a necessity,” said Lauren Asher, president of the Institute for College Access & Success, a nonprofit with offices in Oakland, California.

College Costs

People between the ages of 30 and 39 held about $321 billion in total student debt at the end of 2012, up from about $124 billion at the start of 2005, according to data from the Federal Reserve Bank of New York. Those between 40 and 49 owed $168 billion, up from $53 billion.

The average student-loan balance for the 30- to 39-year-old cohort climbed to $29,400 -- the most of any age group -- from about $20,000 in 2005. Such large and persistent student debt balances could have lasting economic legacies, Asher said.

“Carrying student loans for a long time, and carrying a lot of student loans, can effect choices now and into the future -- when you feel like you can get married and start a family, buy a house, save for retirement,” she said. “Those are challenges that can extend into your 30s and 40s.”

Millennial Implications

Generation X’s plight could paint a grim picture for the millennial generation, those born after 1980, as they too take on debt in response to swelling college tuitions.

Kate Curtis-Bozio, 31 and from Woburn, Massachusetts, is among millennials struggling to gain financial security as she works to pay back the $44,000 in student loans she took out while pursuing her master’s degree.

“Financially, we can’t even plan to have any children right now, because we know how expensive it is for childcare,” said Curtis-Bozio, who is married. She works in crime analysis and mapping at a local police department during the week, and is a restaurant hostess on weekends in order to make her monthly loan payments.

“I worked there throughout grad school, and I was planning on getting rid of it when I got a full-time job,” she said. “Once I started paying back, I realized I can’t afford to get rid of this job.”

America’s youngest workers -- people like Curtis-Bozio -- have time to build wealth and right the ship, Neil Howe, who studies generations and co-coined the term “millennial,” said at a media event Pew held in Washington. That might not be true of their older counterparts, who are well into their economic lifecycle.

“The generation I worry about is Gen Xers,” Howe said.

To contact the reporter on this story: Jeanna Smialek in Washington at jsmialek1@bloomberg.net

To contact the editors responsible for this story: Carlos Torres at ctorres2@bloomberg.net Vince Golle, Brendan Murray

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