August 15, 2012
Report Takes First Steps Toward Showing Effect of Student Debt on Ability to Purchase Homes
[WASHINGTON, DC] – Today, Young Invincibles released a report, Denied? The Impact of Student Debt on the Ability to Buy a House, taking a first step toward showing that growing student debt burdens may exclude borrowers from qualifying for home purchases. The results could further hold back an economy struggling to get back on track and calls for greater research to be done on the topic.
According to the analysis, typical single student borrowers looking to buy homes would need to spend about half of their monthly income on mortgage, student loan, credit card and car payments – making them unqualified for many home loans. Couples looking to buy a home also face challenges, particularly if both buyers hold student debt.
“The report takes the first bite at the apple to show how rising student debt may lead to significant economic impacts,” said Rory O’Sullivan, Policy Director at Young Invincibles. “As educational debt grows, it pushes more borrowers out of the housing market, potentially adding another drag to an economy only just emerging from the Great Recession. More research is needed to understand exactly how student debt impacts the broader economy.”
Failing to qualify for home loans does not exclude student loan borrowers from the housing market forever. Borrowers have the option of delaying home ownership until they pay down debt, save for a larger down payment, or reduce their mortgage amount by looking for smaller, cheaper homes.
The report estimates typical debt-to-income ratios, relying on evidence available from a variety of national datasets. However, current data limitations on student debtor characteristics constrain the ability to make broader conclusions.
To view our interactive debt infographic visit http://debt.younginvincibles.org/
Young Invincibles is a national organization committed to mobilizing and expanding opportunities for all young Americans between 18 and 34 years of age.