How Much Does Student Debt Depress Homeownership?

Total student loan debt in the U.S. recently topped $1.5 trillion, and is negatively impacting homeownership rates for young Americans, according to a forthcoming paper by Federal Reserve economists.

Their study seeks to quantify just how much student debt depresses homeownership rates among adults aged 24 to 32 years old, to add clarity to the tangled relationship between homeownership and student loan debt. Their findings so far show that the student debt growth between 2005 and 2014 accounted for the more than 20 percent of their homeownership rate drop, 9 percent. MarketWatch reports that this translates to roughly 400,000 young adults that were not able to buy a home in 2014 because of rising student loan debt. The paper "adds to the growing body of evidence that student debt does impact the way young adults approach other markers of financial adulthood, such as marriage and retirement," presaging future, national economic ramifications.

“We’re still selling people on the idea that higher education, no matter its cost and no matter the level of debt, is the ticket to a better more stable, more healthy life,” said Julie Margetta Morgan, a fellow at the Roosevelt Institute, a progressive think tank. “For many people, that’s not the case.”

The study by Fed economists aims to estimate the effect of student debt on homeownership, assuming the borrower’s education stays the same. For every extra $1,000 in student debt, the homeownership rate among 4-year public college goers in their mid-20s drops by 1.8 percent, the researchers found. That translates to a roughly four month delay in homeownership ... an extra $3,000 in student debt will delay a young adult homebuyer by about a year.

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