Millennials and Gen Z entered adulthood with the promise that discipline and determination would secure financial stability. Yet for many, that stability never materialized. Bankruptcy filings among younger Americans, especially those aged 18–29, surged 17% from Q1 to Q2 in 2024, with a 13% annual increase, according to Forbes. Let’s look at the causes of this financial instability in these generations.
Student Loan Pressure
Decades of soaring tuition costs have burdened Millennials and Gen Z with crushing student debt. This group now collectively owes $1.6 trillion as of June 2024, as per Pew Research, far more than earlier generations at the same stage. With low entry-level pay and rising interest rates, some see bankruptcy as their only escape.
Stalled Wages
Pursuing a master’s degree often carries a hefty price tag—tuition alone runs between $45,000 and $70,000 (Education Data Initiative). Even though the National Center for Education Statistics finds that master’s holders earn about 20% more than those with only a bachelor’s, rising unemployment among recent graduates means many struggle just to break even.
High-Interest Debt Traps
Credit cards and personal loans offer temporary relief but come with crushing interest rates. Young adults, already stretched thin, rely on these lifelines during financial emergencies. As balances grow faster than they can be repaid, bankruptcy surfaces as one of the exits from cycles of compounding debt that feel impossible to escape.
Skyrocketing Housing Costs
Affordable housing remains elusive for many young adults, as nearly half of renter households spend over 30% of their income on housing, as per U.S. Census data. Unexpected costs like maintenance can amplify this pressure and turn rentals into a greater financial burden than a refuge.
Medical Debt Burden
Unexpected illness or accidents can devastate finances, even with insurance. Millennials and Gen Z delay care due to cost, but emergencies leave little choice. Medical debt piles up quickly. Since they do not have savings to cushion the blow, they take up these expenses on their credit line without any definite payback source.
Financial Stress Is Fueling Mental Health Crises
Crushing debt takes a toll on mental wellness. Roughly 43% of U.S. adults say money negatively affects their mental health, and Bankrate finds this trend is even higher among younger Americans. Sleepless nights, anxiety, and persistent guilt linked to financial pressure push many toward bankruptcy to reclaim their peace of mind.
Debt Relief Scams Are Making Things Worse
Predatory debt-relief schemes lure vulnerable individuals with promises of instant solace only to drain savings and waste time. The Federal Trade Commission uncovered scams that defrauded consumers of over $20 million, deepening financial distress and pushing many toward bankruptcy as their last resort.
Side Hustles Aren’t Saving The Day
The gig economy was supposed to bring freedom, but for many, it just brings exhaustion. Delivery runs and freelance jobs cover bills but rarely create stability. A Deloitte survey found that 46% of Millennials with side hustles still live paycheck-to-paycheck, with little to nothing left for savings.
Single-Income Households Are At Higher Risk
Single Millennials and Gen Zers face higher financial strain, and women carry the heaviest load. Lower wages, childcare costs, and career breaks leave them more exposed to debt. With student loans and housing expenses stacked on one income, many find it harder to stay afloat than their peers.
Unstable Job Markets And Automation Pressures
Millennials and Gen Z entered the workforce during turbulent times—from the Great Recession to the pandemic. Many industries remain unstable, while automation threatens jobs once thought secure. This uncertainty makes long-term financial planning difficult, as career paths shift and incomes fluctuate unpredictably.
