Why student loans affect the housing market
U.S. student loan debt rose to almost $1.1 trillion in 2013, according to figures out from the New York Federal Reserve. Some housing experts worry the burden of those loans is keeping crucial first time homebuyers out of the housing market. But there’s probably more than debt to blame for that.
Ben Miller helped crunch the numbers on student debt for the New America Foundation, where he’s a senior policy analyst. He says more people are taking on student loans, and when they borrow they’re borrowing more.
“So that now you see that the average person who borrowed to take out a bachelor’s degree leaves school owing $29,400,” he says. “And it’s about 70 percent of graduates are taking on that debt.”
Those bachelor degree earners now have to repay almost a thousand bucks more per year than their counterparts just four years ago.
The total of outstanding student loans in the U.S. Source: Consumer Financial Protection Bureau*
The average amount of student debt, when divided among 40 million borrowers. Source: Consumer Financial Protection Bureau
The amount of student loans that are 90 days past due or in default. Source: The Federal Reserve of New York
The number of college graduates who now leave school with any amount of debt. Source: The Federal Reserve of New York
The number of households that carry student debt, double the amount from 20 years ago. Source: Pew Research Center
Lawrence Yun has been crunching numbers too. He’s chief economist at the National Association of Realtors. He says for the last six months, fewer than 30 percent of all home sales were to first time buyers.
“And this is historic lows,” he says. “Typically it should be about 40 percent to 45 percent. And I believe the key reasoning is that many of the younger households, they are saddled with student debt.”
Which makes it harder to qualify for a mortgage.
But before we wag the finger at student loans, there may be a twin culprit. Rohit Chopra is the student loan ombudsman for the Consumer Financial Protection Bureau. He says student loan burdens are rising much faster than wages.
“Real wages when adjusted for inflation have actually been flat for new college graduates for about the past ten years. So young people have more debt but are earning the same or less income,” he says.
That makes student loan debt and low wages – together -- if not the villains, then at least dual wrinkles in the housing recovery.
CORRECTION: An earlier version of this story reported the wrong figure of outstanding student loan debt in this country, according to the Consumer Finance Protection Bureau. The amount is $1.2 trillion. The text has been corrected.