Gen Z and millennials are skipping rent and mortgage bills to pay off medical debt
- A quarter of Gen Z and
millennialsaren't paying their rentor mortgagebills because of medical debt.
- They're having trouble paying their
medical billstoo. It all hurts their credit scores.
Medical debt is getting in the way of young people paying rent or making their mortgage.
That's what a new survey on medical debt from HealthCare.com says, showing that among American adults with medical debt, about one-quarter of Gen Z and millennials skipped rent or mortgage payments because of their debt.
That paints a bleak picture, as recent data from the Consumer Financial Protection Bureau (CFPB) shows that millions of Americans aren't able to pay off medical debt, anyway. About 58% of debt in collections stems from medical bills, according to the CFPB. About 43 million Americans have medical bills on their credit reports, with a cumulative outstanding medical debt of $88 billion. And much of that debt is erroneously distributed by hospitals.
"Having a medical debt collection mark on a credit record can make it harder to get credit, rent or buy a home, or find a job," CFPB Director Rohit Chopra said during a press conference this month. "Families are pushed into bankruptcy by medical debts that they cannot pay."
That debt can tank Americans' credit scores, which is why some advocates say that medical debt shouldn't even be included on credit reports, given that it doesn't reflect choices that a consumer makes.
While medical debt gets in the way of paying bills and securing a lease or a mortgage, millennials are vying for homeownership at higher rates than ever. When they do manage to secure mortgages, millennials commonly report being "house poor," or as having little savings left after paying their mortgages and associated monthly expenses.
"Even a medical bill for a few hundred dollars can present major problems," the Kaiser Family Foundation, a nonprofit that reports on health issues, said in a recent analysis. "Studies find that people with unaffordable medical bills are more likely to delay or skip needed care in order to avoid incurring more medical debt, cut back on other basic household expenses, take money out of retirement or college savings, or increase credit card debt."
Young people are skipping housing bills for medical bills, but aren't making a dent in paying off either
The study also showed that more than half of millennials and nearly half of Gen X with medical debt said that their credit scores have suffered since incurring debt. 68% of Gen Z respondents who have health insurance, but accrued medical debt, reported that their coverage wasn't enough to pay for services received.
These findings are consistent with what the US Census Bureau found last year: Homes with younger heads of household are more likely to have medical debt than those with older heads of household. The survey also showed that nearly one-fifth of US households carried medical debt in 2017, defined as medical costs people are unable to put up front.
The pandemic made it worse — medical debt among Credit Karma's members spiked by $2.8 billion, or 6.5%, from May 2020 to the end of March 2021, according to NBC News. The number of people with past due medical debt grew by almost 9%, from 19.6 million to 21.4 million.
The rising rent costs across the country and inhospitable housing market are at least some of the troubles that young people are contending with alongside medical debt. This past January saw a record 12% surge in average rent from the year before, and 80% of 18- to 34-year-olds said that they felt frozen out of the buying market in a Fannie Mae survey last month.
And young people who do manage to buy houses say they have limited income afterward, which gives context to why so many are unable to pay for their homes when coming into unexpected medical debt. A survey from December showed that 69% of homeowners consider themselves to be house poor, a number that's worse for millennials, 78% of whom considered themselves to be at least somewhat house poor.
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