Student debt is responsible for a nearly 20% drop in home ownership among young adults.
If you’re at the age when you first started thinking about buying a home, the Federal Reserve’s recent homeownership analysis may put the brakes on your plans. The Fed issued a new analysis which found that the national homeownership rate among young adults declined 2% from 2005 to 2014. The reason: The high cost of student debt.
The authors stated that “about 20% of the decline in home ownership among young adults can be attributed to the increase in their student loan debts since 2005”, which means that more than 400,000 young people would have owned a home in 2014 if it had not been for the increase in student loan debt between 2005 and 2014.
While student debt was not the only reason for the decline in homeownership, the Fed’s analysis found a direct link between student debt and homeownership odds, stating that ‘a “$ 1,000 increase in student debt. . . results in a drop of 1 to 2 percentage points in the homeownership rate for student loan borrowers in their late 20s and early 30s.
The analysis also found that student debt levels were higher, with borrowers more likely to default on their student loans, which in turn hurt their FICO scores and their chances of being able to do so. claim a mortgage.
While it is not easy to repay student loans, borrowers have several types of repayment options:
- Three basic repayment plans: These will allow you to pay off your loans in 10 to 25 years, depending on how much you can afford to pay in monthly installments.
- Five income-based repayment plans: These will tie your monthly payments to your actual discretionary income to ease the burden of paying off your student debt.
If you are a health or legal professional, you may be eligible for grants to help you pay off your student loans. Refinancing your student loans allows you to lower your interest rate and monthly payments, and loan consolidation allows you to combine your federal student loans into one loan with one monthly payment.