College Debt Leaves Generation X Grads Less Wealthy Than Parents.

http://www.bloomberg.com/news/2014-09-18/college-debt-leaves-generation-x-grads-less-wealthy-than-parents.html

Most college-educated 30- and 40-somethings earn more than their parents did at the same age, yet they’re saving less. Student debt is partly to blame.

While 82 percent of Generation X Americans with at least a bachelor’s degree earn more than their parents did, just 30 percent have greater wealth. A smaller share of workers without college education -- 70 percent -- have surpassed their parents’ incomes yet almost half had higher wealth, according to a Pew Charitable Trusts report released today.

Lackluster saving among the cohort, those born between 1965 and 1980, has come as student-loan balances persist into middle age. Generation X’s financial straits could come with economic aftershocks, making it difficult for parents to afford college for the next generation and forcing workers to hold onto jobs longer or lower their living standards as they age.

“They may not be financially secure as they approach retirement,” said Diana Elliott, research manager at Pew’s Economic Mobility Project. “To the extent that Gen Xers are still paying student-loan debt, don’t have the wealth accumulated to invest in themselves, they also don’t have that money to invest in their children.”

Pew researches used Panel Study of Income Dynamics data spanning 1968 to 2011 to follow parent-child pairs through part of their economic life cycle.

College graduates in Generation X have far more debt than their peers without degrees, the study found. A typical degree holder who earned more than his or her parents had $13,000 in debt in 2011, more than double the $6,000 in debt held by those with less education.

Student Loans

While credit cards also played a role, student loans are a big contributor to that debt load: Four in 10 upwardly income-mobile college grads hold education debt, with a median balance of $25,000, according to the Pew report.

College graduates tend to come from families with more wealth, so they have a higher bar for surpassing the prior generation than those with lesser education, the report notes.

Overall, three-quarters of Generation X households had family incomes higher than their parents did after adjusting for family size, the Pew report found. Even so, just 36 percent had exceeded their parents’ wealth.

The typical household had $5,000 less wealth than their parents did at the same age, once debts were subtracted from assets.