Student Loan Debt Could Hobble Housing

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It seems like there’s been nothing but blue skies for the housing market since 2013 turned the bend. The rate of home purchase has been gradually rising, and with that has followed an accompanying jump in home values. In fact, the recovery has become so pronounced that Ben Bernanke recently spoke in its favor, making statements earlier this month validating the housing recovery. However, in surveying the greater U.S. economy, there seems to be some fiscal fine print.

According to recent analysis from, one of the greatest antagonists of the current housing recovery is America’s behemoth student debt. As the report notes, student debt’s relationship to real estate health is more abstract than, say, the rate of new homes starts. However, as a generational quandary, it’s enormous. It’s become clear that the current generation of young professionals and educated 20-somethings are actively deferring home purchase. Taking out loans for a mortgage, as their parents before them often had by their late 20s, is a pipe dream considering the unprecedented volume of debt they’re currently juggling.

Without pointing fingers at any one culprit as to its cause, the student debt crisis’ impact on the housing market should be a source for concern. Considering that Americans seem more optimistic about the housing than they have in years, it’s crucial to examine the impact the debt wace could have on housing. So, in light of the fact that America’s collective student debt is only accumulating, what are the consequences?

As a major repercussion, student debt is sidelining an entire generation of crucial homebuyers. As the CNBC report notes, successive generations of college grads have buoyed the housing market year after year as they transitioned towards buying their first home. Individual student loan debt has become so staggering that many young adults are forced into delinquency, further damaging their credit and chipping away at chances of getting a mortgage. As the CNBC article discloses, the amount of 25 to 30 year olds with student debt who were granted a mortgage last year was less than half those granted a home loan in 2005.

It has reached the point where young buyers constitute the smallest percentage of current homeowners in over a decade. While stops and starts in any recovery are to be expected, current trends point to student debt having an outright stagnating effect on the housing market. We’re looking at less of a generational time bomb, it seems, and more of a generational halt. Growth in the housing market could dwindle, or the housing market could even enter a second trough, if heavy accumulation of student debt continues with future grads.

There seem no simple solutions for the student debt problem. The ideal corrective at this point would be for the economy as a whole to recover, so today’s young adults have room to develop skills and earn wages that would make sloughing off their overpowering debt easier. More so than with any other segment of the American economy, the job market looks to be the key to stoking an ongoing recovery- even in seemingly unrelated sectors.

Photo: InAweofGod’sCreation

About Author

Harrison Stowe is a writer for NVR Inc., a prime developer of Baltimore new homes. Addressing a range of topics including investing, mortgages, and real estate, Stowe combines finance knowledge with additional experience working with Ryan Homes in the current real estate market.


  1. Harrison – I agree that the solution to this problem is going to be multifaceted, and it will probably take a few years to implement (and longer to see the results in the housing market). I work with a lot of first time home buyers, and I’ve had quite a few potential client buyers become renters after the pre-approval process. Student debt greatly affects their debt to income ratio. The first step to solving this problem is to raise awareness.

    • Definitely. It’s beyond unfair for the current generation of young adults trying to build families and careers. Regardless of the cause, the student debt burden is hampering far too many otherwise responsible (potential) homeowners.

  2. I have experienced the effects of this first hand. Last summer, when my wife and I were trying to get a mortgage to buy our first home, we discovered that nearly all institutional lenders used their own formula to calculate student loan payments, rather than using the actual payments the Fed charges! There are many programs available to those who have Federal student loans to make their payments affordable- but when using an alternate payment plan, banks will just make up a random payment for you! Bank after bank made up a number that was far higher than even a standard repayment plan would have been for me!

    An immediate solution, for many (those who have Federal Student loans) is for the FHA to use actual student loan payments instead of pulling them out of thin air.

    In my case, after many months were were able to work things out and we were able to buy a larger and nicer house than we were renting, and our payment is more than $100 less than the rent was! I have no problems affording the payments, on my house or my student loans. The trick on student loans is for folks to choose the correct payment plan for their situation- they shouldn’t have any problems making their payments, and if the FHA/banks would use the correct payment in calculating ratios, they would not have any problem qualifying for and making their mortgage payments.

  3. Bahhh. The way I see it who cares if the 20 year olds graduates buy houses, they have to live somewaire! They will just rent a house instead. more rentals needed also creates a demand for housing just as much as those students buying there own home. So if they rent or own. They still take up a house.

    • They do have to live somewhere, but for a lot of people in that age cohort it’s mom and dad’s basement. Given that student debt is for all intents and purposes undischargeable, and given the sheer amount of debt taken on, it’s going to affect both renters and buyers.

      • I think Ben’s on with this one. I have some (slightly older) friends with recent grad children, and many of them are living at home because they can’t afford rent on top of loans. Their kids are pretty driven and work full time- jr. research scientists, market analysts, paralegals. The way the economy has turned in the past few years, it seems living at home after college isn’t just slacker territory.

  4. I know there is not just one answer to the student loan debt crisis. First we have to find solutions. I can tell you the reply’s I got from my Senators in Louisiana Vitter and Landrieu .two that seldom agree on anything they both voted to keep the student loan interest rates down. look like the same person wrote both responses.breaking news is that might not happen either could be as much as $5,000 for a freshmen added to their student loan debt starting next year! Please visit my blog I have a theory Tickle from the middle Up and down Theory. I ask that you comment if like it and tell your friends and if you don’t like tell why I ask you to prove it won’t work!. This is just one part of the solution there will have to be many! Now more than $1 Trillion student loan debt and growing.. and growing….

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