Student debt is hampering graduates from getting on the housing ladder in the US
Student debt in the United States means that graduates wanting to buy a home are having to delay doing so by at least three years and more likely by seven, according to new research.
The study on millennial student loan debt found that only 20% currently own a home and that they are typically carrying a student debt load of $41,200 that surpasses their annual income of $38,800
Some 79% had borrowed money to finance their education for a four year course and 51% are repaying a balance of over $40,000 an d of those who do not own a home some 83% said their student loan debt has affected their ability to buy.
The median amount of time these millennials expect to be delayed from buying a home is seven years, and overall some 84% expect to postpone buying by at least three years.
‘The tens of thousands of dollars many millennials needed to borrow to earn a college degree have come at a financial and emotional cost that’s influencing millennials’ housing choices and other major life decisions,’ said Lawrence Yun, NAR chief economist.
‘Sales to first time buyers have been underwhelming for several years now and this survey indicates student debt is a big part of the blame. Even a large majority of older millennials and those with higher incomes say they’re being forced to delay home ownership because they can’t save for a down payment and don’t feel financially secure enough to buy,’ he explained.
According to Yun, the housing market’s lifecycle is being disrupted by the $1.4 trillion of student debt US households are currently carrying. In addition to softer demand at the entry level portion of the market, a quarter of current millennial home owners said their student debt is preventing them from selling their home to buy a new one, either because it’s too expensive to move and upgrade, or because their loans have impacted their credit for a future mortgage.
‘Millennial home owners who can’t afford to trade up because of their student debt end up staying put, which slows the turnover in the housing market and exacerbates the low supply levels and affordability pressures for those trying to buy their first home,’ Yun explained.
The financial pressures many millennials with student debt are now experiencing appear to somewhat come from not having a complete understanding of the expenses needed to pay for college. Only one in five borrowers indicated in the survey that they understood all of the costs, including tuition, fees and housing.
‘Student debt is a reality for the majority of students attending colleges and universities across our country. We cannot allow educational debt to hold back whole generations from the financial milestones that underpin the American Dream, like home ownership,’ said Jean Eddy, chief executive officer of American Student Assist which collaborated on the research.
‘The results of this study reinforce the need for solutions that both reduce education debt levels for future students, and enable current borrowers to make that debt manageable, so they don’t have to put the rest of their financial goals on hold,’ Eddy added.