Student Loan Debt Is Keeping Adult Kids From Leaving the Nest

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A new Federal Reserve study indicates that the burden of student loan debt has kept more adult children from fleeing the comfort that Mom and Dad's home provides.

Why do so many young adults live with their parents these days? A new study blames the increase in student loan debt.

The number of millennials (ages 18 to 31) living with Mom and Dad is at a record high 36 percent, up from 31 percent in 2005, and the study by Federal Reserve Board economists Lisa Dettling and Joanne Hsu says debt, particularly student loans, caused 30 percent of that increase.

Although the economy did have an impact on the number of 20-somethings moving back in with the folks, especially during the Great Recession in 2008 and 2009, Slate said the study found that the “the downturn couldn’t sufficiently explain the changes that occurred.”

In fact, according to The Wall Street Journal, the study showed a surge in boomerang kids in 2005, before the recession, during a period of growth in both student loan balances and loan defaults.

Debt can make it difficult to live on your own, the report notes. It can also make it difficult to obtain credit to provide the comforts you’d like to have when you leave home but really can’t afford. So staying at home seems more attractive.

The Journal wrote:

Living at home may be a kind of insurance against financial shock for many young people, the Fed economists say. “Large balances may pose high psychic costs, and individuals may choose to live with a parent in order to repay more quickly,” they said. Living with parents may be used, especially among those whose parents have higher incomes, “to smooth consumption, often pre-emptively, as opposed to being a ‘last resort’ option.”

Despite the Fed study’s findings, Slate said it’s difficult to separate the effects of the economy from indebtedness when it comes to young people’s living situations.

Dettling and Hsu’s paper … doesn’t draw a super-clean line between debt and the rest of the economy. It notes, for instance, that rising delinquencies seem to have increased the rate at which young adults moved back home. But delinquencies tend to rise when the overall economy goes sour. It seems hard to completely separate out causation.

I lived with my folks for a few semesters during college, but I didn’t return home after I graduated, even though it was tempting because times were tough. I kept my apartment ice cold to save on heat and survived on Ramen noodles and an occasional home-cooked meal from my parents. I figured that part of being an adult was getting a job, living on my own and struggling to pay bills.

Are you a boomerang kid or a parent of a boomerang kid? Share your experiences below or on our Facebook page, then share or tweet this story by clicking the sharing links above or below.

Here’s a video we produced recently about getting help with student loan debt.

Stacy Johnson

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