Student Loan Debt is Holding Back Home Buyers
Americans hold over $1.7 trillion in student debt, with the average debt held by Virginians now at nearly $40,000. As parents and their seniors are beginning the college application process this fall, it is important to understand how student loan debt impacts life after college. New research from the National Association of REALTORS® shows that student debt can have a big impact on individuals’ life choices post-college, including whether adult children move back home with their parents and whether they are able to become homeowners.
In June, NAR partnered with Morning Consult to survey nearly 2,000 student debt holders across the country, including adults who hold, or have held within the last two years, student loan debt for themselves, a spouse/partner, and/or child(ren).
Delaying a Home Purchase
The NAR/Morning Consult study found that 51% of non-homeowners with student loan debt say their debt is delaying them from purchasing a home. These student loan debt holders report that an inability to save for a down payment because of their student loan payments is the biggest hurdle to homeownership. But concerns about qualifying for a mortgage and general unease about their financial situations are also key factors.
Millennials are most likely to be putting off a home purchase because of student loan debt. According to this report, 60% of Millennials say student loan debt is delaying their ability to buy a home.
About a quarter of student loan debt holders (24%) say that if they paid off their loans, they would put additional money towards the purchase of a home.
Living with Relatives
Student loan debt does not just impact homeownership; it also makes it harder for young adults to move out on their own. More than a third of student loan debt holders (36%) say student loan debt delayed their decision to move out of a family member’s house. That share rises to 52% for African American student loan debt holders.
The National Association of REALTORS® has outlined a set of recommendations to address the mounting challenges of student loan debt. These recommendations include increasing financial education, expanding opportunities to consolidate and refinance debt, and offering tax incentives for employers who held with student loan obligations.
There are other opportunities for prospective home buyers with student loan debt. The Federal Housing Administration (FHA) recently announced changes to its student loan calculations designed to make it easier for student loan borrowers to qualify for an FHA loan.
In addition, there are some student loan debt relief programs in Virginia that provide assistance to individuals who work in selected health care occupations or in some public service legal employment. More resources for REALTORS® on options for home buyers with student loan debt is available from Virginia REALTORS®.
Click here to send any comments or questions about this piece to Virginia REALTORS® Chief Economist Lisa Sturtevant, PhD.