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Tuesday, October 19, 2021
NAR Research: Student Loan Debt Makes Home Buying Difficult
How much does student-loan debt impact buyers? A three-year NAR study calls for reform, noting that millennials are “drowning in student loan debt.”
WASHINGTON – Experts from the housing and higher-education fields joined policy thought leaders from the National Association of Realtors® (NAR) last Wednesday to discuss the current student loan debt crisis and how it affects the economy, housing market, and debt holders. The event explored the findings of NAR’s September report, The Impact of Student Loan Debt.
For the past eight years, NAR has been collecting and examining research to measure the impact of student loan debt on future homebuyers. The report found that student loan debt is one of the most significant hurdles for potential buyers and their ability to purchase a home.
“Today’s millennials are drowning in student loan debt,” said NAR Vice President of Policy Advocacy Bryan Greene to open the event. “Many are concerned that to address student loan debt, we would have to take the load off students and put it on taxpayers. Others advocate help from private employers. We need to talk about all options and explore what reforms are possible.”
According to the report, half of the people with student loans (51%) said it delayed them from buying a home. Jessica Lautz, NAR vice president of demographics and behavioral insights, explored and explained the research recently done.
“We first started researching this topic because of NAR members’ children – they couldn’t afford a home because of the burden of student loan debt. We knew they weren’t alone because there are 40 million Americans holding student loan debt,” says Lautz. “Half of the non-owners say student loan debt is delaying them from buying a home. We asked participants in our research to pretend they paid off their student loan debt – they said the first thing they would invest in is long-term savings and the second would be buying a home. So, we know they want to get into homeownership, but they are having a hard time getting there.”
The Mortgage Bankers Association (MBA) spoke about today’s competitive housing market. Already challenged student-loan holders must face other buyers making all-cash offers in a competitive bidding process. Due to this intense competition, MBA says it supports down payment assistance, which is clearly needed for first-time homebuyers especially in low-income areas.
Senior Vice President of Public Policy for the National Fair Housing Alliance Nikitra Bailey outlined how student loan debt has a disproportionate effect on people of color. NAR’s research found that white student debt holders (30%) are less likely than Black (47%) or Hispanic (47%) ones to say they’re currently incurring student loan debt for themselves.
“Today Black homeownership is as low as it was when discrimination was legal,” says Bailey. “After 20 years of taking out student loans, Blacks still owe 95% of the balance of the debt and are more likely to default. Post-secondary education is now a necessity to succeed, yet a degree is not a shield from racial disparity. Our proposed Down Payment Targeted Assistance Program addresses student loan debt as a burden that leads to the lack of ability to save for a down payment, mostly among Blacks and Latinos. And our Keys Unlock Dreams Initiative will help close the racial wealth and homeownership gap.”
Rachel Fishman, deputy director for research, higher education at New America, was able to explain the burden on parents who take out Parent PLUS loans. These federal loans continue to be an in-between space where parents take on the student loan debt of their child.
“When we talk about student loan debt, we talk about the student, but we need to start correlating the family,” said Fishman. “My hope is to raise awareness about this issue … to start addressing the root cause of debt – food insecurity, housing affordability, childcare. Families are juggling these things on balance sheets along with student loan debt. Among other recommendations, we seriously need to address college affordability for a four-year degree.”
The last speaker for the event was Ben Kaufman, head of investigations & senior policy advisor at the Student Borrower Protection Center. He closed the forum with statistical intel that outlined the chronological timeline of the student debt crisis. Kaufman’s figures showed the increasing financial instability student loan debt is creating and how it stands in the way of people being able to purchase a home.
“Student loan debt has exploded in the U.S.,” Kaufman says. “There are more people borrowing, and they are borrowing more. People think of a student loan debt holder as a young person, but actually, two-thirds of borrowers are over the age of 30. Even before COVID, the rate of delinquency on student loans was higher than the delinquency on mortgages at the peak of the financial crisis.
“Before COVID, a borrower was defaulting on a student loan every 26 seconds. So much of this is policy choices, for generations every single day in Washington, all levels of government, have been making decisions on this. It is imperative to claim your seat at the table so your voices can be heard. If your voices were heard from the onset, I don’t think we would see the consequences we see today.”