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Homeownership

Student debt is delaying millennial buyers by seven years. Yikes!

(HOMEOWNERSHIP) Student debt is making it increasingly difficult for millennials to buy homes putting at least a 7 year hold on the process for borrowers.

starter homes debt existing home sales

The struggle is real

Student Loan debt is holding us up. Big time. The current 1.4 trillion dollar student loan debt represents a hardship on every borrowers future budget.

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However, for many millennials student loan debt is also strapping them on day to day expenses (far beyond just the avocado, of course), the purchase of new cars, and especially – the opportunity to buy a home.

Seven year delay

Many millennials may be looking at an up to 7 year delay in the purchase of a new home, according to the National Association of Realtors (NAR). In a 2017 study, the American Student Association conducted a study co-written with NAR to borrowers aged 22-35.

From over 2000 responses, the results indicated that student loan debt is holding many millennials back from personal and financial milestones.

Only 20% of millennials had indicated they own a home, and they do so even with student loan debt eclipsing yearly salaries. Those who don’t own a home cite student loan payments as one of the many reasons holding them back from saving enough money for a down payment. That’s not even considering that in 2016, 1 out of every six people were in default for their student loans, which can seriously injure your credit score and make it difficult to acquire financing.

Practical steps

The challenges faced by borrowers of purchasing a new home and keeping current homeowners from upgrading or buying the next home represent a new challenge to real-estate professionals.

Going forward, next steps for the real-estate industry should be working with policy makers and consumers to give them the education and tools they need to be successful, as well as working to reduce education debt levels for future students.

Borrowers should be aware of multiple debt repayment options that exist with the federal programs, loan forgiveness options for those in public service and education, consolidation information, and understanding thoroughly the costs of default.

Not all hope is lost

There was some good news with the changes to Fannie Mae’s regulations for determining Debt-to-Income ratios back in May that may make some buyers more able to secure a mortgage, and realtors should be prepared to explain that, but none the less large debt loads will continue to stagnate the sale of homes with millennial borrowers.

#7YearLull

Kam has a Master's degree in Industrial/Organizational Psychology, and is an HR professional. Obsessed with food, but writing about virtually anything, he has a passion for LGBT issues, business, technology, and cats.

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