Gen Z knows it has a debt problem — and it’s getting help for it

United States

Ilaria Tripp amassed $ 8,000 in credit-card bills and a personal loan just over $ 6,000 before finally feeling pinned by her debt.

So the 28-year-old confined her expenses to the bare minimum and applied the rest of her money to paying down the debt. She also started posting TikTok videos about her path to $ 0.

Tripp felt that the online declaration would help her stick to her repayment plan — and she loves watching videos of other people’s debt-reduction efforts.

“The shame, I think, that ties into having debt is diminishing,” said Tripp, who gathered over 1 million views on one debt-repayment video posted earlier this year.

As someone whom TikTok pays for views, Tripp made $ 700 from that one video. She put the money straight toward her debt, and is now down to approximately $ 6,000 on the personal loan, plus more than $ 20,000 in student loans. She’s wiped out her credit-card debt entirely.

She acknowledges that she’s benefited on her debt-payoff journey from living with her parents, to whom she pays below-market rent. She’s also found support from social media.

“With TikTok and YouTube GOOG, +1.06% GOOGL, +1.08% and access to people all around the world sharing their stories, it allows us to see, ‘Oh crap, we’re not alone, we’re all in this together. I don’t have to feel bad about it anymore. Let me get the help that I need,’” Tripp told MarketWatch.

Many younger consumers need that help, because the debt picture is now glaringly in the red for people in their 20s and 30s, according to the Federal Reserve Bank of New York’s latest read on household debt and credit, released Tuesday. Steep rents and expensive car costs are a tough match for many people making entry-level salaries and paying student-loan bills.

But a deeper look at delinquency data and help requests at financial-counseling organizations suggests that some younger consumers — like Tripp — are taking action to lighten their debt loads. And compared with older generations, their willingness to talk more openly about money online and in person may be a real benefit, observers say.

Younger borrowers are increasingly turning to credit counselors

“Instead of suffering in silence or going purely self-help, they are looking into their options and talking to people about it,” said Thomas Nitzsche, spokesperson for Money Management International, a nonprofit credit-counseling organization that’s seen a jump in younger clients in recent years.

Last year, people under age 30 accounted for nearly 13% of the clients that Money Management International helped with nonhousing consumer debts. In 2019, these youngest consumers made up less than 4% of the nonprofit’s client base.

The influx of clients between the ages of 18 and 29 was faster than overall growth trends at the organization last year and through the first quarter of this year, according to the Money Management International’s data.

GreenPath Financial Wellness, another nonprofit credit-counseling group, has also seen a jump in younger clients. Last year, people aged 35 and under constituted nearly one-third of its client base, up from 27% a year earlier.

This increase in young people seeking help from credit counselors makes sense.

Delinquency rates on all types of loans, from credit cards to car loans to mortgages, have continued rising from pandemic lows for all age groups, according to the New York Fed’s debt report. But the spike is especially pronounced for younger consumers.

For borrowers aged 18 to 29, the rate of seriously past-due credit-card bills is just below where it was in late 2010. The serious-delinquency rate on their car loans is now back to its late-2009 level, according to the New York Fed’s data.

The 90-day-past-due rates for these younger borrowers are nearly double the average for all age groups.

To be sure, delinquency rates are often higher for younger borrowers who are just starting their financial lives, New York Fed researchers note.

But these latest statistics on debt arrive amid heightened questions about how consumers are holding up in an environment marked by persistent inflation. While the big picture generally indicates continued strength for wealthier consumers, it’s also shown signs of pullback and caution among people with less money.

Gen Z exhibiting ‘cautious’ spending habits

Today’s economy is distinctly difficult for young adults, according to TransUnion TRU, -1.38%. Gen Z consumers are mired deeper in consumer debts compared to millennials in their early 20s a decade ago, according to the credit-reporting company’s analysis last week.

Though delinquency rates for Gen Z decreased in March on a month-over-month basis, delinquencies for this generation remain higher than average, according to a new analysis by credit-scoring system VantageScore. In turn, Gen Z consumers appear to be pulling back.

“Gen Z has exhibited cautious spending habits,” said Atif Mirza, vice president of digital at VantageScore. Average credit-card balances and utilization rates for Gen Z shoppers have ebbed from the start of the year, Mirza said.

Not everyone is convinced of Gen Z’s newfound caution. Delinquency rates typically decline in the first quarter as people use their income-tax refunds to pay off debt, said Charlie Wise, TransUnion’s global head of research. And delinquency rates among Gen Z consumers from data sources like TransUnion are still higher than they were a year ago, he noted.

“From our broader research, we don’t see specific data that point to Gen Z consumers focusing on reducing debt levels,” Wise said.

‘Less stigma about seeking care’

Money Management International’s Nitzsche said the organization hasn’t made any special advertising or outreach efforts toward younger consumers. Rather, the increase in younger consumers seeking financial help may be related to an attitude shift, he observed.

“They seem to experience less stigma about seeking care than older age groups,” he said.

They also don’t mind being upfront about their challenges — as evidenced by the recent trend of “loud budgeting” seen on TikTok.

Nearly two-thirds of Gen Z respondents (64%) reported telling others that they couldn’t afford to do something in the past 12 months because of their financial constraints, according to a recent poll from Santander Bank SAN, +2.14%. That outstripped the overall 56% average among all respondents.

The tactic of announcing a financial goal can help the person making the announcement, noted Scott Rick, author of “Tightwads and Spendthrifts: Navigating the Money Minefield in Real Relationships.”

“Because it is a public commitment, that is known to increase a sense of accountability,” said Rick, a professor at the University of Michigan’s Ross School of Business.

While it’s no guarantee that the action — like repaying one’s debts — will occur, it may help. “Certainly, we behave ourselves more when we are being watched,” Rick said.

Even if the “loud-budgeting” label is already old hat — if not a joke to begin with — the TikTok treatment of budgeting and debt management is still going strong.

In fact, one reason why Tripp decided to post about her debt-repayment journey was to force herself to stick with it.

“If I am posting it online and people see it, well then I need to be consistent, right?”

See also: TikTok is teaching young people about money — for better or worse. A ban could bring that to an end.

How has debt affected you and your financial decisions? MarketWatch would like to hear from readers about their experiences. You can write to us at A reporter may be in touch to learn more.