How Student Debt Can Severely Affect Home Ownership

According to a survey by the National Association of Realtors and SALT (a consumer literacy program provided by nonprofit American Student Assistance) of the non-homeowners that are paying their student debt on time, 71% said their debt is obstructing them from being able to purchase a home, and over 50% said they expect to be delayed more than 5 years.

Student debt stops college students from buying a home, and it also prevents them from moving out on their own. The survey showed that about 40% of borrowers had to put-off moving out from their parent’s homes because of student debt.

Student debt is a major obstacle

They survey polled student debt holders whose payments were current. Most debt was from 4-year or private universities, and 43% had between $10,001 to $40,000 in student debt, compared to 38% that had $50,000 or more. The most common loan amount was $20,000 to $30,000.

NAR Chief Economist Lawrence Yun commented that while attending college increases their likelihood of finding stable employment and earning enough to buy a home, student debt is also makes it harder to save for a down payment.

Yun says, “A majority of non-homeowners in the survey are earning over $50,000 a year, which is above the qualifying income needed to buy a single-family home, but student debt is hurting their ability to save for a down payment.”

“Along with rent, car payments, and other large monthly expenses that can squeeze a household’s budget, paying a few hundred dollars every month on a student loan equates to thousands of dollars over several years that could otherwise go towards saving for a home purchase.”

The number of first-time buyers is very low right now

More than 75% of non-homeowners who claimed that student debt delayed them from buying a home, reported being unable to save for a down payment. In addition, 69% don’t feel financially secure enough to buy and 63% are unable to qualify for a mortgage because they have a high debt-to income ratio.

Yun says, “Nearly three-quarters of older millennials, many of whom graduated at the peak or immediately after the downturn, said their ability to purchase a home is affected by student debt. Add in the detrimental effects of low inventory as well as rents and home price growth outpacing wages and it’s mainly why the share of first-time buyers remains at its lowest point in nearly three decades.”

Are you struggling with student debt? Feel free to leave your comments and check out 10 student loan tips and 5 careers that grant student loan forgiveness.