Does student loan debt make it harder for most college grads to become homeowners? Here’s a shocker: Yeah, it sure does. Big time.
Those often-immense monthly bills are causing 71% of borrowers to delay buying a home—and more than half of them to put off that dream of homeownership by more than five years in order to save up for that pesky down payment, according to a recent National Association of Realtors® and SALT joint report. SALT is a consumer literacy program run by the nonprofit group American Student Assistance.
About 3,230 borrowers who made their student loan payments on time were surveyed in April for the report.
The burden of repaying the debt has led about four in 10 borrowers to postpone moving out of Casa de Mom y Dad as a result.
“Along with rent, a car payment, and other large monthly expenses that can squeeze a household’s budget, paying a few hundred dollars every month on a student loan equates to thousands of dollars over several years that could otherwise go towards saving for a home purchase,” NAR Chief Economist Lawrence Yun said in a statement.
The most frustrated borrowers were those aged 26 through 35 and those with a towering $70,000 to $100,000 in debt, according to the report.
Eric Tyson, co-author of “Home Buying for Dummies,” recommends those having trouble scraping their piggy banks for down payment cash take a hard look at what they’re spending money on each month—and make some concerted cutbacks.
“Come up with a plan,” Tyson says. “Don’t just wing it.”
Someone who borrowed a lot of money to pay for school may also have a harder time qualifying for a mortgage, according to Tyson. That’s because loan officers look at buyers’ income as well as their monthly debt payments such as credit card, car, and student loans. “If they’re too high, you’re not going to be able to borrow as much,” Tyson says.
And the burden isn’t just affecting those dreaming of buying their own abodes. The debt is also making it harder for some existing homeowners to put their properties on the market and trade up to larger residences, according to the report. That means fewer more affordable homes on the market for first-time buyers.
But hey, all of that gargantuan student debt probably won’t be nothing: At least you’ll make more money.
Grads 25 years old and up earned a median $59,124 a year in 2015, according to the U.S. Bureau of Labor Statistics. Those with a master’s degree made a median $69,732, and those with professional degrees (e.g., doctors and lawyers) made a median $89,960.
Meanwhile, folks who never attended college earned a median $35,256 in 2015, according to the bureau.
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