Millennials reducing debt at fast pace, study says

The millennial generation is aggressively whittling down its debt, as young people forgo homes and cars, according to a new study.

The median debt of households headed by people under age 35 fell 29% between 2007 and 2010, according to the analysis from the Pew Research Center. That compares to a mere 8% decline for households of those 35 and older.

Even more impressive, the percentage of younger households with debt of any kind dipped to 78%, the lowest since the federal government began gathering the data in 1983, according to the study.

But it ain’t coming easy.

Millennials are achieving their newfound financial distinction largely by owning fewer homes and cars. Apparently, taking public transportation and renting apartments (or living in their parents’ garages) are the prices to pay for better personal finances.

Young people also are showing restraint with their credit cards. Only 39% of millennials had credit-card debt in 2010, down from 48% in 2007.

The one factor going the wrong direction? Student debt.

Four in 10 young people owed money from student loans in 2010, up from 34% in 2007 and 26% in 2001, according to the study.

Overall, the millennial debt picture is brightening.

But is it due to frugality – or penury?

It’s not clear if younger people are embracing a longer-lasting thriftiness or if they simply can’t buy cars and rack up credit-card bills because they can’t find jobs in an economy that’s been notoriously hard on them.

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Follow Walter Hamilton on Twitter @LATwalter