Is Student Loan Debt Keeping You From Homeownership?
A shift has occurred over the last thirty years. College has been pushed as the key to endless opportunities and success that may not have been available for parents or grandparents. Caused by this common belief, student loan debt has rocketed up to 1.5 trillion. Student loan debt is the largest category of debt, beyond credit card and auto loan debt. This number will continue to increase with more Americans continuing their education and the rising tuition costs.
Housing experts tie student loans to the drop in homeownership for young families. Student loans are one of the factors that do explain the lower home ownership rate among these families. At the time of graduation, these young people have more debt that their grandparents and parents may have avoided. The debt from college has pushed these individuals from being able to afford a home at the same rate as the older generations.
Lets say a student has about $40,000 in debt, this is nearly enough for a 20% down payment on a median-priced home. $40,000 in debt can be seen as the average amount of debt a student racks up from college.
Fortunately, these debts don't prevent home ownership entirely. By the time that college graduates hit their 30s, the homeownership rate is almost identical to those who did not take out college loans. Still, many recent graduates prioritizing paying off their student loans over saving money for a down payment. Many want to get the debt off their back prior to adding the debt of buying a home. This has delayed young homeowners from joining the market.
In the short run, a bachelors degree pushes back the time frame of becoming a homeowner. In the long run, a bachelors degree increases the chances of actually becoming a homeowner.
If you are a millennial who is focusing on paying off your student loans, you are one of many. Get together with a PorchLight agent to discuss if waiting to enter the housing market is really the best choice for you.