Want to own a home? Say no to student loans

Phillip Molnar
San Diego Union-Tribune

Many Americans have traded a white picket fence for an education.

A study released this month by the National Association of Realtors found 71 percent of non-homeowners with student loans said they believe their education debt has delayed homeownership.

About half of the 3,230 respondents said making monthly payments on student loans will delay ownership by more than five years.

The report comes out as student loan debt has become a topic in the presidential campaign and new research indicates some are worse off financially than if they never went to school.

“Even though they are making all the right decisions, just the burden of carrying this large student debt is postponing some of the realization of what people consider the American Dream,” Lawrence Yun, chief economist of the association, said by phone earlier this month after addressing congressional staff members about the issue in Washington, D.C.

The association’s study, in partnership with nonprofit American Student Assistance, found 4 in 10 borrowers said student loan debt kept them from moving out of a family member’s home.

Although debt blocking homeownership is nothing new, Yun said what is happening now is different from previous generations because student loan debt has tripled in the past decade. He said the average amount of debt students are carrying is rising, ahead of inflation — and could have a dire effect on the economy. The most common debt amount of those surveyed was $20,000 to $30,000.

A recent study from economists at the U.S. Treasury Department and George Washington University found many students were worse off than if they never went to school, said The Wall Street Journal.

The economists tracked the income of 1.4 million students who went to a for-profit college in the two years through September 2008, and those who enrolled in associate and bachelor’s programs earned an average $600 to $700 a year less than the six years before they entered.

The worst off among the students studied were those who took out loans but did not graduate.

Eighty-three percent of younger Millennials, those born from 1990 to 1998, in the Realtor study said they could not save for a down payment because of student debt.

In a March study from Zillow of 10,000 renters and homeowners, Millennials put the most emphasis, 65 percent, of any generation on homeownership as a way to achieve wealth — even more than the oldest Americans.

Yun said student loan debt should not be considered a solution to the lack of housing inventory, even in areas where slowed homebuilding is already having an effect on supply.

“We should not deny the opportunity for homeownership to the Millennial generation,” he said.

The study did not limit answers by geographical location, but Yun said student loan holders in the West, in general, have it harder because of higher home costs.

People with student loans are still buying homes, but the association found 41 percent of first-time homebuyers still have some education debt.

In a prepared statement, association vice president Sherri Meadows said it is important for Realtors and the real estate industry to continue to bring up the topic.

“Realtors work closely with our clients and consumers every day,” she said, “we understand the severity of the problem.

“This is not an abstract issue for us.”

Student loans in the United States make up an outstanding debt of $1.3 trillion and account for 10 percent of all outstanding debt, the study said.

Yun said borrowers with large amounts of debt should not give up hope of owning a home, in part, because he and others are advocating changes that would allow loan holders to refinance to lower interest rates.