The Rising Problem of Youth Debt

Young adults are the fastest growing age group filing for bankruptcy. I have personally seen this in my own practice among people in their mid to late twenties. Most every case seems to have the same elements; credit card debt, student loans, and dismal job prospects.

Very little can be done about the economy, but problems caused by credit cards and student loans are really a matter of financial education. The overall level of financial literacy is abysmally low in this country. Less than 20% of Americans consider themselves to be financially literate. Combine this with a culture of immediate gratification and youthful inexperience and you have a recipe for future insolvency.

It doesn't help that the Credit Card Industry has been aggressively pursuing college age adults. They have been employing aggressive marketing campaigns and promotional events on campuses across the country. As a result, more than 84% of all college students have a credit card, and half have 4 or more. Upon graduation, the average credit card debt for students is around $4,100, with one in five carrying a burden of over $7000.

The explosion of student loan debt represents the next looming debt crisis. Total outstanding student loan debt in the US has surpassed credit card debt for the first time in 2010, nearing $1 trillion. Student loans are particularly problematic because it is very easy to borrow too much and they are typically not dischargeable in bankruptcy. The average college student in 2010 graduated with $25,000 of student loan debt

So the average person finishes college with a total of almost $30,000 of debt that they need to service. This is an average, so for a person from modest means who did not have a scholarship or support from their family, the burden could be much larger. Given that the unemployment for recent college grads in 2010 was around 9.1%, it is no wonder that youth bankruptcy is on the rise.