By Selina Stoller, Summit AmeriFirst Holdings, LLC
Millennials in the United States are taking longer to invest in the quintessential American dream of a white picket fence – and student loan debt is mainly to blame.
As homeownership among young people reached a record low in 2017, national student debt reached an all-time high in the first quarter at a cool $1.3 trillion.
According to a study by the National Association of Realtors, 71 percent of student loan borrowers who did not own a home cited their college loans as the main prohibitive factor, and more than half said they expect their student debt to delay their home purchase by five years or more. Record high home prices here certainly don’t help either.
However, student debt and the market are not the only reasons. Millennials put off homeownership.
Millennials tend to marry and have children later in life than prior generations. Data from the Census Bureau show that 55 percent of 25 to 34-year olds live with a spouse or partner, compared to 80 percent of young adults in 1967. (And many are still living at home with their parents or other relatives.)
This kind of debt creates harsh obstacles to homeownership in a few different ways. Making a student loan payment every month reduces the amount of income one can save for a down payment on a house. Student loans can make it harder to qualify for a mortgage too.
Lenders want all monthly debt obligations to make up no more than 43 percent of one’s monthly income. According to a Harvard Joint Center study, 20 percent of Millennial borrowers had to pay 14 percent or more of their income towards a student loan. And with a car payment or a balance on a credit card or two, there isn’t much wiggle room for a mortgage payment.
- 4 Jul, 2017
- Josh Smith