Regulatory Contact(s):Ken Fears,
What is the fundamental issue?
New research clearly indicates that the continued rise in student debt along with a weak labor market has a long-term impact on the ability of first-time homebuyers, particularly lower income consumers, to qualify for mortgages. Many of these potential borrowers find a significant portion of their total monthly debt is comprised of student loan payments. Additionally, lower price point homes available to purchase are at historical lows which further price out potential buyers with student loan debt as home prices continue to rise.
I am a real estate professional. What does this mean for my business?
NAR research indicates that student debt negatively impacts the ability of potential home buyers to save for or meet down payment requirements. Student debt is also having an impact on potential homebuyers’ ability to qualify for a home due to high debt-to-income levels. These factors have limited their access to affordable mortgage options needed to purchase a home. Though a vast majority of borrowers have been responsible and diligent in making their student loan payments, their ability to save for priorities such as emergency savings, medical expenses, and down payments have become more difficult and impact their decisions such as purchasing a home.
NAR strongly supports policy proposals to allow student loan borrowers to refinance into lower interest rates and to streamline loan programs. Additionally, NAR supports policy proposals that promote student loan simplification, clarity and education. Further, NAR supports policies that provide tax relief to student debt holders, as well as to employers who choose to assist with their employees' student loan debt burdens. In addition, NAR supports policies that provide tax relief to those borrowers with forgiven student debt. NAR also shall ensure that mortgage underwriting guidelines related to student loan debt are standardized and do not impair homeownership.
Lawmakers in both parties have proposed changes to the student loan program to deal with the large outstanding debt. The question is whether they will enact anything. The best chance may be with riders on fiscal 2019 spending bills. The reauthorization of the Higher Education Act is another possibility, but very unlikely at this point.
Democrats back measures that would cap the burden on borrowers. Republicans are skeptical, saying college graduates earn more than non-graduates and should be able to pay off their loans. But Republicans are willing to simplify the federal loan system and they advocate giving borrowers more clarity about the debt and their ability to pay it back.
Some Members of Congress seem interested in tax changes to assist those paying off student loans. However, it is not presently clear whether these ideas have a path forward in the current legislative landscape.
Conventional Financing and Policy Committee