While student loan debt has surged 56% in the past decade to an average of $28,950 per borrower, this doesn’t appear to have had a negative impact on homeownership. In fact, higher education has a positive effect on homeownership, according to our research.
A Zillow analysis of the Panel Study of Income Dynamics found that homeownership increased for each successive level of education, even as student debt went up.
According to Zillow’s analysis, homeownership dropped only 2.1% when a married household with a bachelor’s degree accrued $30,000 in student loan debt. Similarly, for couples with at least one master’s degree, there was just a 5% decline in homeownership with student loan debt of $50,000. These findings were echoed by a 2015 study by TransUnion that found a 3% difference in the mortgage participation rate between those with student loans and those without.
“With student debt on the rise, there’s been a lot of speculation about whether the cost of a college degree hurts an individual’s ability to buy a home,” says NerdWallet’s Ling. “From what we’ve seen, getting a four-year degree or higher is actually positively associated with homeownership — even when accounting for debt.”
Those who did see homeownership rates decline because of student debt were millennials with student loans and without a degree, or those with student debt and an associate’s degree. When families with associate’s degrees faced debt of $50,000, homeownership rates fell 16%.
In 2013, only 8% of households repaying student loans had high debt burdens — defined by the Consumer Financial Protection Bureau as over 14% of monthly income toward debt. According to an analysis by New America, a nonpartisan policy institute, bachelor’s degree graduates with debt pay an average of $312 a month in student loans. Considering the estimated monthly income of $2,940 for a 25- to 34-year-old millennial, this is a student debt threshold of 11%, which is a medium debt burden, according to the CFPB.
But the group of millennials with student loans who didn’t earn a degree could have an impact on homeownership rates for
younger people, if the trend continues. According to the Harvard Joint Center for Housing Studies, “Over half of households in their 20s and 30s with student loan debt in 2013 did not have four-year college degrees.”