Student Debt Not Holding Back Housing Market

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The FINANCIAL — Having a lot of student debt doesn’t greatly reduce young people’s chances of homeownership, as long as they graduate, a new analysis by Zillow has found.

The findings challenge a popular concern: that giant student loan payments are holding back people from homeownership. As it turns out, graduates’ debt loads don’t materially hurt their chances of homeownership – especially if they get at least a four-year degree.

“College students paying their tuition with borrowed money can rest easy this fall in their dorm rooms: the income advantage of getting a degree pays off in terms of being able to buy a home in the long run,” said Zillow Chief Economist Dr. Svenja Gudell. “Student debt isn’t the evil-doer it’s made out to be, at least not when it comes to homeownership. As long as students stay in school and get a degree, student debt doesn’t deter them from homeownership, although it is possible that student debt could delay homeownership. People in their 20s and 30s are renting longer because they’re delaying marriage, paying a lot in rent, and struggling to qualify for a mortgage when they finally find an affordable home. Add to that list that they are paying off student debt.”

Here are some key findings:

Student debt has only a small negative effect on the odds of homeownership for a person with a bachelor’s degree or higher. The chances of a married coupleii with no student debt owning a home are about 69.8 percent if at least one of them has a bachelor’s degree. If the same couple has $30,000 in student debt, their homeownership chances drop slightly, to 67.7 percent. 

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The least likely to own homes are people who have student debt, but no degree. In fact, a couple who borrowed more than $30,000 for school but never graduated has a less than 40 percent chance of homeownership. 

Graduates with advanced degrees are the most likely to own a home, even if they racked up a lot of student debt. For example, if a couple owes $50,000 in student loans, but one of them has a master’s degree, they have a 75 percent chance of homeownership. A similar household with just $10,000 in loans and only a bachelor’s degree has just a 69 percent chance of homeownership. 

Student debt has the greatest impact on the homeownership rate of people with two-year associate’s degrees. A couple with AA degrees and no debt has a 70 percent chance of owning their home. That declines significantly as debt grows. If the same couple has $50,000 in student debt, they own their home only 57 percent of the time. 

Getting an associate’s degree improves chances of homeownership until a person has borrowed $70,000. After that, their chances of homeownership would have been better without a degree and no student loan debt. 

Getting a bachelor’s, master’s or doctorate degree – regardless of debt – increases the chances that people will buy a home.


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