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How Student Debt Ruins Homeownership for Many Americans

This was originally published at the New York Times

Homeownership among Americans in their 20s and 30s is hovering near a three-decade low. Just 35 percent of households headed by someone younger than 35 owned a home in 2017, down from 41 percent in 1982, according to census data. Now, they are much more likely to be living at home with their parents or elders.

At the same time, the nation’s student loan bill has soared to $1.4 trillion, surpassing credit cards to become the largest source of personal debt outside mortgages.

A broad set of headwinds is holding millennials back from buying homes. Underwriting standards have become stricter in the last decade, making it more difficult to get a mortgage. Many young people are moving to cities where they can only afford to rent — a problem that has been compounded as home prices have soared while wages have barely outpaced inflation.

And recent research suggests that the explosion in tuition costs and student debt is another significant force keeping many millennials out of the home buying market. An analysis published by the Federal Reserve Bank of New York last year suggests that student debt was responsible for up to 35 percent of the decline in homeownership among people between the ages of 28 and 30 from 2007 to 2015. (Homeownership for people under 28 tends to be low.)

If student debt levels had stayed where they were in 2001, more than 360,000 people in that age group would have owned a home in 2015, according to those findings.

“If people had the same levels of student debt as about 20 years ago, they probably would be buying a lot more homes than they are buying now,” said Wilbert van der Klaauw, an economist at the New York Federal Reserve and an author of the study.


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