We're not saying this just as a punchline, college students really are broke. So it shouldn't come as a surprise that millennials, many of whom are in college, spend less money than previous generations.
The media loves to shit on us for being a bunch of cheap degenerate snobs. But these stories are out of touch, and other factors have directed our spending habits.
One of the main factors is the student debt we carry. In today's economy, employers' demand for employees with college degrees has gone up in recent years, causing millennials to pursue a college education at a higher rate compared to other generations. This has proven to be problematic however, as government spending on college per student has gone down since the 1960s, and has sharply decreased since 2008 due to the financial collapse. Because of this, many college students find ourselves drowning in student debt. Americans as a whole owe $1.2 trillion in student debt, and most of that is owned by millennials. 63 percent of millennials have at least $10,000 in student debt, and a third of us owe more than $30,000.
Due to factors like student debt, we're spending less of our paychecks on consumer goods than generations past. And this has come with economic consequences. On average, millennials spend 27 percent less on discretionary consumer goods than Generation X does. If this trend continues, businesses could end up in deep trouble, because sales from consumer spending is what gives them the ability to hire workers and make investments into the economy. With profit margins falling, businesses won't have the adequate revenues to hire us when we're out of college, lowering our ability to generate an income which will lead to even less consumer spending, making it harder for us to pay off our student debt, and thus creating a viscous cycle of economic and social anxiety.
How should the government respond?
One of the most direct solutions to alleviate our student debt woes would be to make college tuition free (of charge to students). This will do two things. First, it'll allow anyone who's academically qualified to pursue higher education, the ability to go off to college. With more students receiving college educations, the workforce will be enriched with much more skilled and productive employees to hire. Second, we can spend more of our incomes on goods and services, rather than paying off loans. This increase in consumer spending will act as a huge boost to the American economy.
Another way to help out college students would be to increase the budget deficit. This is a necessary policy tool for the government to implement, otherwise the United States economy could see itself in prolonged recession. Many people would find this concerning, but it's necessary because a deficit means the government poured more money into the pockets of consumers than it took away from us in taxes. And as I explain in an article I wrote in the past, the deficit is nothing more than an accounting identity reflecting the state of economy and private sector consumer spending levels.
Lastly, for those of us currently struggling with loans, paying them back would be made easier if the Federal Reserve lowered their interest rates. The Fed's recent rate hikes have made it more expensive for millions of college students to pay back our loans.