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Millennial Student Loan Debt Tanks Housing Market

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There are currently about 54 million millennials entering the workforce in the US, and for many of them, the idea of buying a home isn’t an immediate goal. That’s because the majority (70%) are under an enormous amount of student debt. Large school loans are motivating many millennials to put off their first home purchase until they pay down some or all of their education expenses. The delay is having an immediate impact on the housing markets.

couple looking over their finances


Currently, student loan debt has reached $1.3 trillion, which is about $3,800 for every person in the US, according to an article in the Boston Globe. Education loans are now the next largest source of consumer debt, second only to mortgages.

The shifting debt burden isn’t helping an already hurting housing marketing, which has seen home ownership rates slip to a 50-year low. A recent study by American Student Assistance and the National Association of Realtors found 71% of students cited student loan burden as the main factor for delaying a home purchase.

The lack of demand from debt-burdened Millennials is causing a ripple effect throughout the entire real estate market, said Jonathan Spader, senior research associate at Harvard’s Joint Center for Housing Studies. “To the extent that there’s weak demand at the first-time home-buyer level, it prevents existing homeowners from trading up,” Spader said. “That demand is central to the health of the broader real estate market.”

What makes the situation worse is the number of loan defaults on students, which amounts to over 11% of student loans currently. “The impact of those defaults on their credit reports could be a barrier to homeownership in the future,” Spader said.

The major contributor of the overall problem is the high cost of education. College is too expensive, and the fault lies squarely with the federal loan programs, which keep the costs higher than they would be otherwise.

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