How Will the Return of Student Loan Payments Affect Housing Affordability?

Student loan payments are set to resume on Oct. 1, after a three-year payment pause initiated during the pandemic. Student-loan borrowers already confronting record inflation are expressing concerns about affording necessary everyday costs once the student loan moratorium is lifted, and for some, that may mean deciding between debt payments or housing payments.

In a recent survey conducted by Morgan Stanley, just 29% of borrowers were confident they would be able to make their student loan payments, while 34% said they would be unable to make payments at all, Insider reports. In addition, 27% of respondents said they were worried about making rent or mortgage payments once debt payments resume.

58% of polled experts believe that the resumption of student loan payments could have a significant impact on mortgage affordability, according to a recent analysis conducted by Pulsenomics. 35% of experts believed the resumption of payments could significantly hit the US homeownership rate, and 26% believed it could significantly impact the mortgage delinquency rate, the research firm added. 

Student loan payments will kick back in at a time when housing affordability is already strained. The US homeownership rate slipped to 65.9% over the second quarter, Fed data shows, while delinquencies at 30 large mortgage servicers rose to 3.16%, according to an analysis from Inside Mortgage Finance.

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