Student Loans Affect Homeownership

A $1,000 increase in student debt results in a 1-2% decrease in homeownership, study finds.

Homeownership among 24- to 32-year-olds fell 9% between 2005 and 2014. A key factor for that drop is tied to the rise in student loan amounts, according to the Federal Reserve in a recent report from its Consumer and Community Context series. The Federal Reserve directly attributes about 20% of this drop in homeownership to student debt and estimates approximately 400,000 potential homeowners have been impacted. According to the report, an increase of $1,000 in student debt results in a 1-2% decrease in homeownership among borrowers in their late 20s and early 30s. Overall, student debt for individuals under the age of 40 during that 2005-2014 time-frame more than doubled, rising from $290.1 billion to $754 billion. Such debt can affect former students’ ability to save for a new home. It can also impact their credit scores later in life, especially if they default on the loans, and negatively impact their ability to qualify for a home loan. As of the third quarter 2018, overall student debt has reached $1.6 trillion. Student debt and auto loans account for more than 90% of non-revolving credit and approximately 69% of all outstanding non-housing credit.

Source: The National Association of Home Builders

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