Young adults carry 12% more debt than last year, driven by housing and student loans

Young adults are entering their twenties with heavier financial burdens than previous generations. According to data from TransUnion, the total debt held by members of Generation Z is currently 12% higher than it was just one year ago. This increase persists even after adjustments for inflation, marking a departure from historical patterns observed among Millennials.

Ted Rossman, a credit expert at the nonprofit Money Management International, reported a 35% rise in demand for counseling services from Gen Z clients over the past twelve months. He attributed the shift to the compounding costs of student loans, high rental prices, and the growing use of buy now, pay later services. These factors have left many young adults operating on tight cash flows with minimal savings reserves.

Rossman described the current economic climate as a period of intense pressure for early career stages. "You have student loans, you have high housing costs," he said. "Those household formation years are very expensive, so GenZer’s actually have more debt than Millennials did at the same age, even adjusted for inflation according to TransUnion."

The rise in buy now, pay later plans has complicated household budgets. Rossman noted that while these services offer short-term interest-free periods, they function as debt. "It’s very popular among people in their 20’s, but it’s still debt," he said. "Just be mindful that it’s not a free lunch." He warned that consumers must track payment schedules carefully to avoid accumulating additional charges.

Credit card interest rates present another layer of financial risk, often reaching the 20% range. Rossman advised individuals feeling overwhelmed to seek professional assistance. He emphasized that understanding one's budget and monitoring deferred payment services are essential first steps for stabilizing finances.

The data reflects a broader trend in household formation costs. As rent and tuition continue to rise, the gap between income and expenses has widened for young workers. This financial strain is driving more people toward credit counseling agencies for structured guidance on managing obligations.