Considerably more debt, dwindling savings, lower incomes, and higher housing costs are among the big factors why Black millennials struggle harder to build wealth than their contemporaries, according to a new study.
Those Black Americans largely are facing a more challenging financial future even though there are some cases where they are faring better or at the same level as other millennials.
However, the alarming news is young African Americans have over $11,000 more in non-mortgage debt —an average of $101,809 vs. $90,590–than millennials overall. Student debt accounts for the largest portion of that tab, with those Blacks owing an average balance of $61,724 versus $56,538 for all non Blacks. Thirty five percent of Black young people declare their debt puts them at risk of bankruptcy.
Further, the average African American millennial has a salary of $67,802 and $42,026 in savings. That is lower than $74,106 and $42,948, respectively, in those areas for the average non-Black millennial. As such, 60% of Blacks tussle to afford their bills versus 56% of all millennials. Some 53% of AA millennials have been denied a loan at some point due to their finances versus 49% of white millennials.
Matt Brannon, author of a new study on millennial debt, said, “The combination of making less money, owing more in debt, and having to pay higher housing costs is a recipe for financial hardship over the next few years, especially if President Biden’s student loan forgiveness plan ends up not materializing.”
Moreover, a large disparity between Black and white millennials is tied to housing. For example, 41% of those Blacks have missed a housing payment (rent or mortgage) at some time as opposed to 34% of white millennials and 38% for millennials overall.
The information is based on figures from this study in which 1,000 millennials were questioned in the survey in late April paid for by Real Estate Witch. Blacks made up 14.6% of those quizzed.
Brannon provided some commentary tied to Black young people making less income and owing more in debt than the average millennial: “That means it will likely take them a few more years than their peers to become debt-free, which is the biggest financial goal for 70% of Black millennials.”
He added another factor hindering Blacks from building wealth historically has been a low rate of homeownership.
“If your parents were homeowners, they have an extremely valuable asset to pass down. But discriminatory policies in the past limited older Black Americans’ ability to buy a home, which means their children missed out on the head start that other children received,” he said.
To boot, Brannon says because Black millennials are more likely to live in cities, higher rents and mortgage payments disproportionately impact them compared to white millennials. “That would explain why Black millennials are more likely than average to say they struggle to afford housing.”
Still, the findings did offer some hope. Some 19% of Black young people aren’t in any non-mortgage debt versus 10% of millennials overall. The 50% of Black millennials in credit card debt is smaller than the 57% of White and millennials entirely.
“Those are encouraging signs for Black millennials because it’s evidence that they are on the way to closing the wealth gap between Black and White Americans,” Brannon said.