Gen Z has nearly tripled its overall debt load in the past two years, a new survey shows.But that actually may be a good sign.
Gen Zers (ages 18 to 26)have increased their debt outside of mortgages by 99% − more than any other generation, according to online lending platform Lending Tree's analysis of more than 150,000 credit reports from thefirst three months of 2023 and 87,000 from March 2021.At the same time, millennials (ages 27 to 42)swelled their balances by nearly 21%. By contrast, Gen Xers (ages 43 to 58)and baby boomers (ages 59 to 77) cut their debt by 3% and 26%, respectively.
Including mortgages, Gen Zers increased their total debt by 179%, or an average of $10,797, to $34,133, LendingTree said. That, however, is the lowest dollar amount among all four generations.
"It's important to understand that accruing debt isn't always a sign of struggle,” said Matt Schulz, LendingTree’s chief credit analyst. “It can actually be a sign of confidence.”
Why Gen Z’s ballooning debt balance isn't worrisome
Part of it is just growing older, Schulz said.
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“The oldest Gen Zer is 26 now,” he said. “They've had time to establish some credit, so their credit score is rising, meaning they're more likely to qualify for loans, and the loans they get are more likely to have better terms." He added that Gen Zer income is probably higher, too, and any loans they receive may be bigger than what they might have been able to take out a few years earlier.
Another part of their debt burden may stem from their confidence that they can handle higher amounts.
“Yes, they're taking on debt, but they're doing so with the belief that they'll be able to handle it going forward," Schulz said."I'd bet that is at least part of what we're seeing.”
Is Gen Z the most in debt?
While Gen Z has the fastest-growing debt load, Gen X has the largest average debt balance at $167,493, followed by millennials' $124,295, LendingTree said.
“You can’t run up big debts if you can’t get access to credit,” Schulz says. “Gen Xers have higher credit scores than Millennials and Gen Zers and bigger income potential than baby boomers, many of whom have already retired. That means that it’s likely easier for them to get approved for more and bigger loans or credit lines.”
Much of Gen X’s debt stems from an average mortgage balance of $121,712, which is nearly as much as the total average debt carried by millennials andmuch more than the entire $34,133 debt carried by Gen Z. Boomers owe a total of $119,017, on average.
Baby boomers were the only generation to pay down their overall debts, a reversal from LendingTree’s study between 2020 and 2021 when they were the only generation to have increased their debt. In the past couple of years, boomers paid off $21,870 (or 15.5%) of their total debts, LendingTree said.
Which generation is most in debt?
Beyond mortgages, Gen X is spending the most on their cars. Auto debt accounts for the highest percentage of this age group’s nonmortgage debt, making up 37% of their total debts, LendingTree said.
They’re not the ones with the largest share of car debt, however. Gen Z takes the top spot with 46% of their debt coming from auto loans.
Student loans make up a higher percentage of millennials’ debt balances than any other generation, at 36%.
Gen Zers saw particularly significant balance spikes for personal loans (rising $1,292, or 207%) and credit card balances (rising $1,771, or 174%) during the past two years.
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.comand subscribe to our freeDaily Money newsletterfor personal finance tips and business news every Monday through Friday morning.
