Report: Student Debt Sidelines Half of Would-Be Buyers

A student graduate stands on a cliff with a student debt bill.

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Student debt has long been blamed for preventing many home sales. Half of potential home buyers surveyed this year say they haven’t bought yet because of student debt, according to a report by the National Association of REALTORS® and Morning Consult. Millennials are the most likely to point to student debt for delaying homeownership.

“Housing affordability is worsening, leaving future home buyers with student debt at a severe disadvantage,” NAR President Charlie Oppler told CNBC.

Student loan debt can affect eligibility for a mortgage. A borrower’s payment history on student loans can affect their credit score. Any defaults on student loans will make it more difficult to get approved for a mortgage, lenders say.

But those with student loan debt are still finding ways to buy. For example, they can apply for a mortgage with a co-signer such as a family member or friend to help to improve their credit status.

Staying current on student loan payments is crucial, Mark Kantrowitz, a higher education expert, told CNBC. Borrowers should avoid deferments or forbearances leading up to homeownership.

Kantrowitz noted one exception, however: the current option to pause payments without accruing interest. The U.S. Department of Education started offering this option to borrowers at the beginning of the pandemic, though it will end in January. “The eligible federal student loans are reported as current to the three national credit reporting bureaus, so there shouldn’t be an impact on applying for a mortgage,” Krantowitz told CNBC.