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For some time, housing industry experts have been discussing the impact of student loans on the ability of many to purchase a home, especially since the number of first-time homebuyers in recent years has dropped and remained lower than usual. Thanks to a paper by Federal Reserve Board economists, the industry now has a better idea of just how much homeownership is impacted by student loan debt. According to Drs. Daniel Ringo and Alvaro Mezza, authors of a report that was presented during a recent REALTOR® University Speaker Series session, a 10 percent increase in student loan debt cuts the homeownership rate by 1-2 percentage points 24 months out of school. Additionally, that 10 percent increase in student loan debt increases the probability that a borrower falls into the subprime category (a credit score of 620 or less) by 0.6 percent. And while this is not great news, it's not catastrophic, according to Ringo and Mezza, because that 10 percent increase in student debt delays the typical home purchase by just three months.
Story Springboard
Listen to the REALTOR® University presentation on student debt and homeownership access. Talk to potential homebuyers about the impact student loans have on their ability to buy. Speak to a REALTOR® on what they see regarding the relationship between student loans and ability to buy a home.