Student Loans vs. Buying a Home
Home ownership and higher education are two of the pillars of modern society. Of course, a good education can mean a better career, which makes owning a home easier.
But how does student loan debt affect buying a house?
In the last ten years, the amount of student debt in the United States has tripled, hitting $1.3 trillion. At the same time, home ownership had dropped to the lowest point in nearly half a century — hovering at just above 63 percent.
courtesy of Fannie Mae
To understand this better, it is important to be aware of a few facts regarding student debt and home ownership.
First, individuals with a minimum of a bachelor’s degree are statistically more likely to be homeowners than those without a degree. This holds true even when the person with the degree is carrying student debt. This statistic comes from the Fannie Mae National Housing Survey.
While student loan debt does not necessarily negatively impact home ownership, home ownership for people aged 25-44 who have both a bachelor’s degree and student debt is only 28 percent higher than those without a degree or student loans.
When the age metric is removed from the analysis, those with student debt and a bachelor’s degree are 43 percent more likely to be homeowners versus those without a degree free of student debt.
The takeaway? While higher education is conducive to higher levels of home ownership, a dichotomy exists that also supports the notion that student debt can, at the very least, burden the debt holder enough to delay home ownership.
If anything, considering that the average cost of tuition for a private college is in excess of $32,000 per year and over $9,000 for a public university, student loans are more than likely going to be a necessity for most young people.
Friends from college, all too often, are friends for life.
Yes, it is a balancing act. This is why long-term planning should begin early. Avenues for scholarships should be explored and non-traditional financing for higher education should also be pursued. Recent graduates should strive to structure debt so repayment does not take more than ten percent of their monthly income.
Be smart about student debt and in the end it will bring you closer to your dreams of home ownership sooner, rather than later.