The Impact of Student Loans on Millennial Homebuyers

Share Save Sign up for DS News Daily Home / Daily Dose / The Impact of Student Loans on Millennial Homebuyers The Impact of Student Loans on Millennial Homebuyers Subscribe  Print This Post According to many reports, student loan debt is a significant hurdle for millennials when buying a home. But new numbers from the First American Economic Center contradicts those findings, showing that student loan debt is more likely to delay the timing of homeownership, but it’s not necessarily a deal breaker. To examine the impact of student loan debt on house-buying power, the report looked into the median household income of a prospective first-time home buyer, who is, by definition, a renter. “Renter’s house-buying power is based on the prevailing 30-year, fixed mortgage rate (4.64 percent in January), and assumes a 5 percent down payment and that one-third of pre-tax income is used for the mortgage,” the report reads.The average student loan debt for those that complete their bachelor’s degree is approximately $30,000. Based on a 6 percent Federal direct student loan interest rate, the average monthly payment is just above $300 per month, or nearly $4,000 per year. The report pointed out that this reduces median household income for those that complete their bachelor’s degree and, therefore, reduces house-buying power by $23,000 to $323,603. While the reduction in house-buying power is not ideal, renter house-buying power for those with a bachelor’s degree is still more than $120,000 greater than renters with just a high school education.So, how does higher house-buying power influence home buying? Quoting the latest available household census data in 2017, First American stated that homeownership rates for those with a bachelor’s degree are nearly 8 percent higher than those with a high school degree. This difference becomes more exaggerated when comparing those with a college degree to those who do not complete high school—nearly a 25 percent difference in homeownership rates.In short, education pays off when it comes to home buying power. Nine out of 10 millennials say their college education was worthwhile and have already paid off their debt or will in the future. Student-debt adds up, but higher education leads to higher income wherein the increase in income attributable to higher education far outweighs the impact of student loan debt. Although the price of college is high, in the end game not going to college may cost more. Read the full report here. About Author: Stephanie Bacot Related Articles Previous: How the Weather Influences Home Searches Next: The Price of Affordability Governmental Measures Target Expanded Access to Affordable Housing 2 days ago Education First American Homebuying 2019-02-18 Donna Joseph Tagged with: Education First American Homebuying Servicers Navigate the Post-Pandemic World 2 days ago The Best Markets For Residential Property Investors 2 days ago in Daily Dose, Featured, Market Studies, News Stephanie Bacot is an experienced multimedia writer having created content for print, web, television, and more. She is the past producer of BIZTV, a national television network for businesses and entrepreneurs that reached more than 200,000 professionals. She has more than 15 years’ experience in healthcare marketing and was an advertising exec for Healthcare Journal of Baton Rouge, a trade publication focused on the healthcare industry, as well as the marketing director for a $5 million surgery center. Bacot is a graduate of Louisiana State University with a degree in Marketing and Communications. She resides in Dallas when she’s not pursuing her love of travel. Governmental Measures Target Expanded Access to Affordable Housing 2 days ago The Week Ahead: Nearing the Forbearance Exit 2 days ago Servicers Navigate the Post-Pandemic World 2 days ago Data Provider Black Knight to Acquire Top of Mind 2 days ago The Best Markets For Residential Property Investors 2 days ago Demand Propels Home Prices Upward 2 days ago February 18, 2019 4,566 Views Demand Propels Home Prices Upward 2 days ago Data Provider Black Knight to Acquire Top of Mind 2 days ago

Leave a Reply

Your email address will not be published. Required fields are marked *