We all know that the millennia kill the housing market, diamonds and pretty much everything else good and sacred. But did you know that thousands of years of inability to buy homes are linked to their crushing student support? Of course you did, you're not an idiot.
The Federal Reserve, on the other hand, is apparently just catching up to this reality. A new paper released by the Fed today links rising student debt to dropping home ownership among young Americans between 2005 and 201[ads1]4.
The total amount of US student debt is now astonishingly $ 1.5 trillion, which exceeds credit card debt and car loans. It is surprising that this financial burden makes it harder to buy a home, which in turn damages the housing market.
From Wall Street Journal :
Homeowners among people aged 24 to 32 fell 9 percentage points, to 36% from 45%, between 2005 and 2014, Fed said. While many factors impacted the housing property rate, the Fed said 2 percentage points, or about one-fifth of the decline, directly related to student debt. It was translated into 400,000 borrowers who could have owned a home by 2014, but not because of student loans.
The reason for this is twofold: First, it makes it clear that student loan payments put on your finances and makes it harder to save money and put a down payment on a house. Secondly, those who fall behind on student loans have poorer credit, and therefore find it more difficult to qualify for mortgages.
The Wall Street Journal interviewed such an unfortunate soul, Tyler McKinney, 25, graduating from the University of Alaska Anchorage in 2017, with $ 33,000 in student loans.
From Journal :
The degree led to a solid job in information technology and a salary of $ 68,300. He wants to buy a home, but not until he pays his loan, then he rents an apartment in Anchorage for $ 875 and month, while spending more than $ 500 a month against his student debt. His balance is now $ 22,000.
Mr. McKinney says he can afford to buy but wait instead. "If I am going to buy a house before the student debt was paid, I would only pay student debt until I am in the 50's," he says. "I will get that monkey off until I make some new investments."
Fed research says that the burden on student loans overcomes the benefits of going to college.
"While the investment in postgraduate education still provides On average, positive and significant returns, burdensome student loan levels can reduce these benefits, "Fed researchers wrote.
Another Fed report released today noted that many student debt students are leaving rural areas where they Grow up to move to urban areas, this is quite sensible: if you are struggling with large amounts of debt, you need the kind of high-paying job available in cities if you hope to pay it. one reason why rural areas are more dangerous today than urban areas.
And despite all this, researchers say it is still quite impossible to buy a home without having a college exam.
"The only way to get the foot in the door is to have a degree, even if it comes with debt," says Ralph McLaughlin, deputy economist at CoreLogicInc, Journal .
Only it was possible to go to college without to get in plenty of study support! Like, for example, if the college was vacant. Dare to dream.