Monday, July 11, 2016

​STUDENT LOAN DEBT A HURDLE TO HOMEOWNERSHIP



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​​The U.S. currently has a student debt load of $1.3 trillion, which accounts for 10 percent of all outstanding debt. The magnitude of the debt continues to grow in size and share of the overall debt in the economy. While this amount of debt has risen, the homeownership rate has fallen, and fallen more steeply among younger generations. To evaluate those trends, the National Association of REALTORS(R) (NAR) teamed up with American Student Assistance(R)'s (ASA's) SALT(R) consumer literacy program to conduct a survey of student loan borrowers who are current in repayment. The results are available in a new report entitled Student Loan Debt and Housing Report 2016: When Debt Holds You Back. Notably, only 55 percent of student loan borrowers are current in repayment.

Among non-homeowners, 71 percent cite student loan debt as the factor delaying them from buying a home. This is most frequently the case due to the fact that borrowers cannot save for a down payment because of their student debt. Sixty-nine percent of those who are delayed don't feel financially secure enough and 63 percent can't qualify for a mortgage due to debt-to-income ratios. Millennials are more likely to have difficulty saving for a down payment, and Gen Xers and baby boomers are more likely to have high debt-to-income ratios. For older millennials, 79 percent believe their student loan debt is delaying them from buying a home.

Among homeowners, 31 percent say student debt is impacting their ability to sell an existing home and move to a different home. These homeowners face a variety of problems: 18 percent believe it is too expensive to move and upgrade to a new home; 7 percent have problems with their credit caused by student loan debt; and 6 percent are underwater on their home.

The delay in buying a home among non-homeowners and homeowners is five years. One in five expect to be delayed three to five years. Those with higher amounts of student loan debt and those with lower incomes expect to be delayed longer from purchasing a home than those with higher incomes and lower amounts of debt.

Forty-two percent were delayed moving out of their family member's home after college, regardless of whether they were buying a home. This delay has a financial impact on both parents and the student loan borrower. Twenty-two percent were delayed by at least two years in moving out of a family member's home after college due to their student loans. While 18 percent are currently homeowners, 17 percent live with friends or family and do not currently pay rent. Forty-six percent of younger millennials live with family (both those paying and not paying rent) compared to just 25 percent of Gen Xers.

Among survey respondents, most are employed. Seventy-one percent are employed full-time, 14 percent are employed part-time and seeking full-time employment, and 10 percent are seeking employment. Sixty-seven percent received their loans from a four-year college, 31 percent from a two-year college, 27 percent from graduate/post-graduate school, and 11 percent from a technical college.

According to the National Association of REALTORS(R) 
Profile of Home Buyers and Sellers, among recent homebuyers, one-quarter have student loan debt and the typical amount is $25,000. The share of those with student loan debt rises to 41 percent among first-time homebuyers. Even among successful homebuyers, this amount of debt is cited as a difficulty in the home-buying process.

To find the full report, go to 
www.realtor.org/reports/student-loan-debt-and-housing-report.


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