IS STUDENT DEBT STANDING IN THE WAY OF HOMEOWNERSHIP?
Student loan balances have doubled since 2007 to well over $1 trillion. Meanwhile, millennials are taking much longer than previous generations to buy their first home. A recent study examined whether student loan debt is preventing young adults from purchasing homes*.
Surprisingly, the study concluded that there is no causal relationship between student debt and delayed homeownership. In fact, debtors in their late 20s were more likely to own a home than non-debtors. The study gives several alternative explanations for why millennials are delaying their first home purchase when compared to prior generations. Mainly, the delay in homeownership seems to be part of a larger trend of delaying the period of life known as “transition to adulthood”. For example, the share of 18-34 year-olds who are married with children has also fallen from 27% in 2000 to 20% in 2015.
The study did find one major correlation between student loans and delayed homeownership: student loan debtors who dropped out of college did have much lower rates of homeownership vs. student loan debtors who graduated from college.
Moral of the story? If you’re going to take out student loans, it’s better to graduate from college with a degree that leads to a high-paying job.
*Jason Houle and Lonnie Berger. 2015 “Is Student Loan Debt Discouraging Home Buying Among Young Adults?”89:589-621, Social Service Review