Student loan debt continues to grow in size and share of the economy. Currently, the U.S. has student loan debt of $1.4 trillion, which accounts for 10% of all outstanding debt and 35% of non-housing debt.
How does student loan debt impact millennial homebuyers?
A new joint study on student loan debt recently released by the National Association of Realtors and American Student Assistance® shows that while the amount of debt has risen, the rate of homeownership has fallen, especially among younger homeowners.
In fact, in spite of being in the prime age to buy their first home, the majority of millennials with student debt do not currently own a home and do not plan on buying a home for up to seven years, as debt delays their purchase.
Only 20% of millennials currently own a home. 28% rent with roommates, 15% rent on their own or from friends and family, and 15% live with friends and family without paying rent. Of the 80% of current non-owners, 83% believe that their student loan debt has affected their ability to buy a home.
The median student debt load is $41,200, which suprasses the median annual income of $38,000.
79% borrowed to finance their education at a four-year college, and 51% are repaying a balance of over $40,000. A significant percentage, 17%, are paying a balance over $100,000.
85% of survey respondents believe that they are delayed due to their inability to save for a down payment because of student loan debt. 74% of those do not feel financially secure enough to buy a home, and 52% cannot qualify for a mortgage.
48% of younger millennials born between 1990 and 1998 cannot qualify for a mortgage due to their debt-to-income ratios, compared to 57% of older millennials born between 1980 and 1989.
If a student loan borrower did not have to pay toward student loan debt, more than three-fifths would put the extra money toward a long-term savings investment or purchase of a home.
For those millennials with student loan debt who do own a home, 28% face housing hurdles and are unable to sell their existing home and buy another property. They face a variety of problems: 21% believe that it’s too expensive to move and upgrade to a new home, 4% have trouble with credit, 3% are underwater on their home.
42% of those with a student loan debt of more than $100,000 and 33% of older millennials are in a situation where they would rather sell and purchase another home but cannot.
You can download the 2017 Student Loan Debt and Housing report on our website at www.TRGDFW.com. If you have any other questions about real estate, just give me a call or send me an email. I would be happy to help you!