You've spent four years studying (and partying) hard, taken obscure philosophy classes to expand your mind, and pulled all-nighters cramming for finals—and now it's over and you have a college degree to prove it. Congratulations! And as a constant reminder of your college experience, you might be paying off those student loans for decades to come.
Millennials blamed those wallet-busting monthly loan payments for delaying the purchase of their first home by seven years, according to a recent study by the National Association of Realtors® and the nonprofit group American Student Assistance.
The study is based on a 41-question survey answered by more than 2,200 people, aged 22 to 35, who are currently repaying their student loans.
Student loan bills that can total hundreds of dollars each month can make it tough to save up for a down payment for a home or qualify for a mortgage. The loan balance increases a potential borrower's debt-to-income ratio, which loan officers scrutinize before issuing mortgages.
"While in general, workers with a college degree earn higher incomes and have higher homeownership rates, these survey results suggest those borrowing for college need help understanding the costs of college and consequences of debt," says realtor.com®'s chief economist, Danielle Hale. "Otherwise, decisions students make at age 17 or 18 have ramifications on their life and purchase decisions for decades."
Millennials carry about $41,200 in student debt, but make only an average $38,800 a year, according to the survey. Ouch! That could explain why only about 20% of them currently own a home. About 83% of millennials who don't own a home blame their student debt.
The debt isn't just making it harder for millennials to become homeowners in the first place. It also makes it more difficult for those who already own a home to sell it and trade up to a nicer one, because they don't have enough extra cash lying around. It typically delays trading up by about three years, according to the study.
In addition, about two-thirds of younger millennials (born between 1990 and 1998) also say that the student loan burden makes it harder to afford to move or rent an apartment without roommates.
"The tens of thousands of dollars many millennials needed to borrow to earn a college degree have come at a financial and emotional cost," NAR's chief economist, Lawrence Yun, said in a statement. "Even a large majority of older millennials and those with higher incomes say they’re being forced to delay homeownership because they can’t save for a down payment and don’t feel financially secure enough to buy.”
About 63% of those surveyed say they would put more of their money toward buying a home if they didn't have the debt. About 15% said they'd use the money to move out of their family's home. Later, Mom and Dad!
Graduates attribute most of their debt to four-year colleges, at 79%, followed by graduate and postgraduate degrees, at 29%, and two-year colleges, at 19%. (The numbers exceed 100% because many students went to more than one kind of institution.)
"A scenario where only those with minimal or no student debt can afford to buy a home and save for retirement is not an ideal situation and is one that weakens the economy and contributes to widening inequality," Yun said.
Source: https://www.realtor.com/news/real-estate-news/student-debt-many-years-delay-homeownership/?iid=rdc_news_hp_carousel_theLatest