Student Loans & Homeownership [2023]: Data Analysis

Report Highlights. Since 2005, homeownership among recent college graduates has declined by 1.8% for every $1,000 of their student loan debt.

51% of renters say student loan debt keeps them from buying a home.
29% of student loan debt holders say their debt has kept them from homeownership.
72% of student debt holders who do not own homes say they believe student loan debt will delay homeownership.
37% of first-time homebuyers have student loan debt.
First-time homebuyers with student loan debt spend an average of 19% less on their homes than buyers without student debt.

Comparison of Monthly Payments on Education Data Initiative

“Student loan repayments are forcing millions of young families to delay purchasing their first home, as they cannot afford to save for a downpayment or qualify for a mortgage while also paying off student debt.” Transforming Student Debt to Home Equity Act, H.R. 7368, 117th Congress (2021-2022)^[1]

How Student Loan Debt Delays Home Purchase*
Demographic*	Delayed Home Purchase	Delayed Home Purchase 5+ Years
All Adults	50%	20%
Male	63%	22%
Female	36%	15%
Up to 25 Years Old	59%	11%
26 – 41 Years Old	70%	23%
41 – 57 Years Old	51%	22%
58 – 76 Years Old	28%	13%
Income Under $50K	45%	25%
Income $100K+	55%	16%
No College Degree	39%	13%
Bachelor’s Degree	55%	24%
Postgraduate Degree	58%	11%

*Among adults who have or had student loan debt within the last two (2) years and who currently own homes.

How Student Loan Debt Impedes Homeownership

Statistics indicate that student loan debt decreases prospective homeowners’ ability to make a down payment and to qualify for a mortgage; most Americans cannot afford to purchase a home without a mortgage.^[2]

Since 2005, for every $1,000 increase in student loan debt, homeownership has declined by 1.8% for recent college graduates under 35.
47% of student debt holders stated that their loans prevented them from making a down payment on a home.
Between 2005 and 2014, homeownership declined 5.8%; homeownership among individuals aged 24 to 32 years old dropped 20.0%.
Also between 2005 and 2014, student loan debt among 24- to 32-year-olds doubled.
Up to 20% of the decline in homeownership among 24- to 32-year-olds may be attributable to increased student loan debt.^[3]

Student Loan Debt-to-Income

A high debt-to-income ratio (DTI) reduces mortgage eligibility, which then excludes potential buyers from homeownership.

45% of student debt holders believed that their poor debt-to-income ratio disqualified them from getting a mortgage.
The average DTI for a new graduate is 54.6%.
A 43% DTI is the upper limit to qualify for a mortgage with most lenders; this figure includes the prospective mortgage payment.
The U.S. Consumer Finance Protection Bureau recommends a 36% DTI to qualify for competitive mortgage rates.

Student Loan Debt’s Financial Impact

Student loan payments impact a borrower’s credit score (either positively through on-time payment or negatively through delinquency) and limit a borrower’s ability to accumulate wealth through savings and investments.

72% of student debt holders believed their debt would delay them from purchasing a home for the foreseeable future (several months to more than 8 years.)
19% of student debt holders specifically believed their debt would delay them from purchasing a home for more than 8 years.
36% of student loan debt holders say they lived with family after college due to their student debt.
10% of student loan debt holders currently live with a family member.
17% of student loan debt holders say they lived with family for two (2) years or more after college due to their student debt.

Student Loan Debt & Other Factors Influencing Homeownership

Other factors that influence homeownership make it difficult to accurately quantify the impact of student loan debt on homeownership.

Marriage increases the likelihood of homeownership by 10.4%.
A college degree increases the likelihood a woman will have a marriage that lasts 20 years or more by 59.2%.
Children increase the likelihood of homeownership; each child makes the student loan holder more likely to own a home by 0.17%.
A bachelor’s degree makes it 120% more likely that a man will be at least 30 years old when he first becomes a father.
If the student debt holder is unemployed, each additional month of unemployment decreases the likelihood of homeownership by 0.68%.
Any college degree increases the likelihood of employment 1.71% (compared to a high school diploma).
A bachelor’s degree increases the likelihood of employment 2.88% (compared to a high school diploma).
33% of people who have or had student loan debt and who make under $50,000 per year say student loan debt prevented them from home purchase.
Among homeowning adults who have or had student loan debt within the last two (2) years and who make under $50,000 per year, 45% say student debt postponed their home purchase.

Student Loans & Homeownership Among Ethno-Racial Demographics

Economists and sociologists generally agree that certain socio-cultural factors influence homeownership among some demographics more than others. In other words, racial and ethnic minorities struggle to attain homeownership due to factors beyond their personal control.^[4]^[5]

21% of White households have student loan debt.
43% of Black households have student loan debt.
White college graduates are very likely to receive financial support from their family for the purchase of a home.
Whereas, Black college graduates are significantly more likely to be the financial support for their families, especially their parents.
Black college graduates are more likely to have a higher student loan debt partially because their income goes towards financially supporting older generations.

Student Loans & Homeownership Among Age Groups

Student loan debt delays certain age groups from purchasing a home, but does not permanently prevent them from eventually becoming homeowners. Individuals with a bachelor’s degree but no student loan debt had the highest rates of homeownership in each age group.

College graduates 35 to 39 years old are 8.3% more likely to own a home if they have no student loan debt.
Among 30- to 34-year-old college graduates, those without student loan debt are 13.2% more likely to own a home.
Among college graduates aged 25 to 29 years, those without student loan debt are 6.1% less likely to own a home.
Homeownership is 5.8% higher among 20- to 24-year-old college graduates if they have no student loan debt.
Roughly, 40% of Generation Z say their student loan debt is delaying them from owning a home.
60% of Millennials say their student loan debt postponed them from buying a home.
53% of Generation X stated their student loan debt is delaying them from owning a home.
More than 30% of Baby Boomers said their student debt postponed them from buying a home.
35% of Millennials who have or had student loan debt say that debt kept them from buying a home.
Among homeowning Millennials who have or had student loan debt within the last two (2) years, 70% say student loan debt postponed their home purchase; 24% delayed for 5 years or more.

Student Debt to Home Equity

Lawmakers have made efforts to mitigate student debt if it helps people purchase homes. On the national level, one such bill is the Transforming Student Debt to Home Equity Act of 2022. These programs give first-time home buyers who have a history of making student loan payments on time access to special opportunities, such as:

Mortgage loans at below-market rates at relaxed qualification standards.
Discounts for purchasing government-owned homes.
Additional financial assistance for making down payments.

Maryland Mortgage Program

The Maryland Mortgage Program is a home ownership assistance program for recent college graduates and first time buyers. Specifically, the Maryland Smartbuy 3.0 sub-program assists first time homeowners who still have student debt. The potential buyers must also take a homebuyer education class in order to qualify for the program.

Maryland Smartbuy 3.0 offers 15% off the purchase price of a home to help pay off a mortgagor’s existing student debt.
The maximum amount Maryland Smartbuy 3.0 offers is $30,000.
The mortgagor must have their student debt fully paid off by the assistance program at the time of the home purchase.

Ohio Grants For Grads Program

The Grants For Grads program is an assistance program intended for home purchasers who graduated college within the last 48 months. Grants For Grads is regulated by the Ohio Housing Finance Agency (OHFA).

This program offers a 2.5% or 5% down payment assistance towards buying a new home.
The down payment assistance is forgiven after 5 years domicile in the state of Ohio.
The program requires the mortgagers to undertake a homebuyer education course.

Rhode Island’s Ocean State Grad Grant Program

The Ocean State Grad Grant is specific to recent graduates who received their diploma 36 months ago. The program requires the applicant to be a first-time home buyer and they must obtain their mortgage through the Rhode Island Housing or a participating program lender.

Offers up to $7,000 assistance on a home purchaser’s down payment.
Household income for 2 people must not exceed $89,280.
Household income for 3 or more people must not exceed $104,160.
The borrower must attend a homebuyer education course.

Student Loan Debt & Homeownership