Millennials and debt: 
Why are they different?

There is no shortage of information about millennials on the Internet. The demographic of individuals born between the early 1980s and early 2000s has been the recent focus of nearly every industry for a variety of reasons.

First, and perhaps most obviously, there is the inexorable – and accelerating – transition from the older generations of baby boomers and Generation X to the new millennial generation.

What is likely the bigger factor in the high interest in this generation is that millennials are perceived to be markedly different from preceding generations.

The exact scale of these differences is the subject of some debate. When it comes to the issue of millennials and debt, however, there is a general consensus. Below are four primary differences in how millennials handle debt differently than generations before, and a look at how this affects debt collections departments.

They seek credit less often

Millennials are considerably less attracted to debt than the preceding generations.

For instance, Federal Reserve data1 indicates that the percentage of Americans under 35 with credit card debt has dropped to its lowest level since 1989.

There is likely a variety of factors at play with this millennial aspect, but no doubt the generation’s large student loan burden is one of the heaviest. The Federal Reserve notes that student loan balances have reached their highest levels in history.2 This high debt burden understandably makes millennials hesitant to seek out additional debt.

In addition, millennials have been more reticent to use credit in making large purchases, such as houses and cars. Of course, as a consequence of their lower credit card usage, many millennials may not have built a sufficient credit history to qualify for large installment loans to begin with.

Millennials’ low desire for credit has even broader implications than a thin credit file, however.

Specifically, millennials may be less likely to care about their future credit prospects – and how their present decisions may impact them.

In other words, millennials may deem the maintenance of their credit score as a lower priority than older generations, which may make debts more difficult to collect from millennials.

As such, collectors should not rely on methods such as reminding millennial debtors of the impact on their credit score or future credit prospects.

They are suspicious of the financial industry

Millennials spent their young adulthood experiencing firsthand the financial collapse of 2007/2008 and the Great Recession.

As such, these events shaped the views of millennials to a large extent. And with much of the blame pointed at banks and other financial institutions for the collapse, it should come as no surprise that millennials are leery of the industry as a whole.

The implications for debt with millennials are multifaceted. As previously discussed, millennials aren’t particularly eager to obtain credit liability, which is due, in large part, to suspicions millennials have about the financial industry and the larger credit framework itself.

That is, with the financial collapse and Great Recession being such an influential part of millennials’ early adult lives, they generally aren’t ready to buy into the system of credit and debt on which the financial system is built.

This suspicion may make it more difficult to collect debt from millennials, and collectors should be cognizant of this potential viewpoint from a millennial debtor.

Millennials are more likely to be living with their parents

Young adults are living with their parents in greater numbers than ever. In fact, 32.1% of millennials live with their parents, compared to 14% who live on their own, or, 31.6% who live with a spouse or partner.3

Once again, this may make it less likely for millennials to seek out debt to begin with, since they likely have fewer living expenses.

Furthermore, such living arrangements also make it more difficult to locate a millennial debtor, since the millennial’s parents are named in public address and phone records, and often not the millennial debtor him- or herself.

Consequently, collectors may need to employ a more expansive search of public records to successfully locate such a debtor.

In addition, because many millennials lack a significant public records footprint due to living with their parents, collectors may need to become more creative in their skip tracing endeavors to locate debtor millennials. Namely, they will need to find a connection in public records to others with whom the millennials may be living. For example, if a millennial debtor is still living with his or her parents, it may be most effective to find a debtor’s high school public records in order to find the address associated with that individual – since his or her parents may still be living at that address.

While such an approach may seem unorthodox, it may be largely necessary to locate hard-to-find millennials with untraditional living situations.

Millennials are digital natives

Perhaps one of the most common perceptions about millennials is that they are very tech savvy, having been born into and raised in the era of the Internet. In fact, millennials spend seven hours a day online, according to one study.4

The consequence of this behavior is that most millennials create a massive digital footprint online. This footprint can make it far easier to locate a debtor that traditional search strategies have been unable to find.

Specifically, by scouring social media sites and blogs, collectors may be able to not only locate a missing debtor, but also find the means through which to communicate with him or her.

What’s more, because millennials are so likely to conduct as many of their financial affairs online as possible, they may be more responsive to being communicated with digitally, allowing collectors to skip the string of unsuccessful phone calls. However, this also means that collectors have to employ more sophisticated technologies to successfully locate the ever more elusive millennial.

While skipping phone calls in favor of electronic communications – not to mention some of the other strategies mentioned here – may seem well outside of traditional collection norms, it’s important to remember that such unique techniques may be required for a generation that is itself perceived to be so unique.


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