Myth: Student debt keeps young people from buying homes.
Reality: Lack of a degree, not student debt, is the culprit.
“Is college debt truly keeping a generation of young adults from buying homes?” A Chicago Tribune article begins by asking that question. The answer is “No!”
In this article, the Tribune says,
“That’s been the popular storyline as people in their 20s have shunned the housing market since the housing crash. Economists seeking explanations for a change in behavior, and worried about a long-term drag on the economy, have theorized that the slowdown was due largely to a record level of student loan debt in the country – about $1.3 trillion. The narrative: Struggling recent college graduates can’t buy homes and will continue to be deterred from buying because they are shackled with immense college loans.”
Then continues,
“But Susan Dynarski, a University of Michigan economics professor and fellow of the Brookings Institution, … says that a surprising number of respected economists have adopted an alluring narrative of millennials unable to buy homes even though it’s one built on flawed evidence that has been debunked by research done for the Federal Reserve Board of Governors more than a year ago.”
Low earnings, not student debt, are keeping young people from buying homes. Generally speaking, young people who went to college and have student debt are buying homes, while young people who didn’t go to college aren’t because they don’t earn enough. The ones that are buying homes want to make sure they are making the right decision with the properties they are putting their money into, luckily websites like Reali can be highly beneficial for these times in helping with real estate opportunities.
Dynarski reached this conclusion in a paper she prepared for Brookings that you can read here. She also found another widespread belief about student debt is also a misconception: Which student borrowers are defaulting.
“The real problem with student debt, she said, is not for people who complete bachelor’s degree college programs and leave college with the $30,000 in debt that’s average among those who borrow. Rather, she said, defaults on student loans are high among another group: students who attended community college or for-profit colleges for a while and dropped out with debt.”
In short, the young people who are struggling with student debt and are unable to buy homes are those who didn’t complete four-year degrees and graduate into decent-paying jobs. Virtually all studies show that without such a degree, a worker’s earning power will be much less over the course of a lifetime. However, struggling with debt is an unnecessary stress in life; if you want to help yourself start getting out of debt, you could contact a federal student loan repayment company who might be able to help put you on a repayment plan that suits your current situation.
These findings come at a time when U.S. college enrollments are dropping. Perhaps that’s tied to the improving economy; people tend to go to school when jobs aren’t available and return to the workforce when they can get work. In any case, CNN reports that fewer Americans are attending postsecondary schools, and the declines are greatest in community colleges and for-profit schools — the two categories of education most likely to produce troubled student loans. Read that story here.
The lesson? Stay in college and earn that four-year degree, even if you have to go into debt to do it, because you’ll be much better off by doing so.