Gen Z Has the Most Debt of Any Generation — Ways It Could Hurt Their Financial Goals

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Gen Z is just entering adulthood, and according to a Talker Research poll conducted for Newsweek, they are the generation struggling with the most debt.

More than half of the generation, which includes those born between 1997 and 2012, said that debt is on their minds most or all of the time, putting quite a burden on these young adults. 

While it’s unfortunate that so many Gen-Zers find themselves in this predicament, they are right to worry. Too much debt can be crippling to a long-term financial plan and unless they can figure out a way to manage that debt, they could be facing a lifelong struggle that follows them right into retirement. 

Fortunately, there are steps that anyone can take to get out of debt and back on a financially sound path.

Here’s a look at the current state that Gen Z is in, why it’s problematic, and what they can do to get back on track. 

How Much Debt Does Gen Z Have?

According to the study, Gen Z carries by far the highest amount of personal debt, averaging a whopping $94,101. The only other generation that is even close is the Silent Generation, born between 1925 and 1945, with an average personal debt of $75,001. Millennials and Gen-Xers, who are most often compared with Gen Z, have far lower average debt levels of $59,181 and $53,255, respectively. 

Even worse, according to the New York Fed, Gen Z has the highest percentage of debt more than 90 days late. And this percentage has only risen over the past three years. 

Why Does Gen Z Have So Much Debt?

In their defense, Gen Z has, in many ways, encountered the perfect storm. In many cases, it takes a college degree to get a high-paying job, but the cost of tuition has run far ahead of both wage growth and inflation. This means that many Gen-Zers have been saddled with huge student loan debt at a time when they can’t earn enough to realistically pay it off. 

Another factor is that the housing market is at near-record levels of unaffordability. As home prices continue to rise and mortgage rates remain relatively high compared with recent years, many Gen-Zers are paying hundreds of dollars more per month on a mortgage than they may have expected — or can realistically afford. 

How Can Debt Interfere With Financial Goals?

The housing market has long been one of the most reliable paths to long-term wealth. But Gen-Zers with a high amount of debt have low credit scores. This makes homes even more unaffordable, blocking a key way for Gen-Zers to generate long-term wealth.

A high level of debt also means this generation has to divert more of their cash flow to debt payments instead of savings and investment. If you’re trying to save 15% of your income for retirement but you have to put 15% of your income towards debt instead, you’re essentially running to stand still. As compound interest is so important in building a sizable nest egg, every year that Gen-Zers delay can cause significant damage to their future account balance.

Steps Anyone Can Take to Get Out of Debt

No matter what generation you’re in, if you’re burdened by debt, you should act sooner rather than later. Here are some time-tested, concrete steps you can take to get out of debt:

• Stop digging: If you continue adding to your debt, you’ll never get out. Cutting up your credit cards might not be too dramatic a step if you can’t find a way to stop overspending on them. But no matter how you do it, you have to stop growing your debt.
• Direct as much of your discretionary income as possible towards your debt: If you want to get out of debt quickly, you’ll have to make some tough decisions to strip down your lifestyle. Stop eating out and cut back significantly on your discretionary expenses. This means, for at least a period of months or years, you’ll have to cut down on expensive trips, streaming services and “retail therapy” shopping trips. 
• Get a 0% credit card: If you’re paying interest of 20% or more on your credit cards, it can be difficult to impossible to contain your debt. But if your credit is still okay, you should be able to get a 0% balance transfer credit card and eliminate that interest for anywhere from 12-18 months. This can make the difference between struggling with debt and climbing out from under it. 

There are other steps you can take to get out of debt, including the dramatic step of filing for bankruptcy. But that should be an absolute last resort. At the very least, take the steps above first to see if you can get out of debt without destroying your credit.

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