The huge majority of millennials carrying student debt currently do not own a home – and they believe student debt is to blame for the delay.
This is according to an April 2017 study on millennial student debt released in September 2017 by the National Association of Realtors and the nonprofit American Student Assistance. In April 2017, ASA distributed a survey to 92,419 student loan borrowers (ages 22 to 35) who are current in repayment. A total of 2,203 student loan borrowers completed the survey.
You may have heard of this study, which has been making headlines. Today we’ll walk through a few key stats this study found, what it means for you as a future homeowner – and why there’s still plenty of hope.
Most Millennials Expect Delay In Buying First Home
Only 20% of the millennial respondents (ages 22 to 35) currently own a home. So why is it that 80% of the millennials in the survey don’t own one? 83% of them point the finger at student loans. The median amount of time they expect to put off becoming a homebuyer is seven years.
Consider these facts about the student loan debt that’s shaping their choices:
- The typical amount of student debt of $41,200 exceeds their annual income of $38,800.
- 79% borrowed money to finance their education at a four-year college.
- 51% are repaying a balance of over $40,000.
Sales to first-time buyers have been sluggish for several years now, with the percent share of first-time buyers in the past three years holding steady at 33 percent – well below the long-term historical average of 40 percent.
In fact, a quarter of current millennial homeowners said their student debt is keeping them from selling their home to buy a new one, either because upgrading is too expensive or because their loans have had a negative impact on their credit for a mortgage in the future.
Student Debt Also Impacting Other Life Choices
86% of millennial respondents described themselves as having made sacrifices in their career, all because of their student debt. These measures included:
- Taking on a second job.
- Staying in a job that makes them unhappy.
- Taking a job outside their field.
Meanwhile, more than half are delaying continuing their education and starting a family, while 41% would like to get married but are delaying this milestone because of student debt.
Very unsettling is the finding that 61% of respondents at times have not been able to make a contribution to their retirement. 32% were sometimes able to make a contribution, but with a reduced amount.
A pattern where only those without student debt can afford homeownership and saving for retirement could certainly ultimately weaken the economy. However, Jean Eddy, president and CEO at ASA, notes that, “Student debt is a reality for the majority of students attending colleges and universities across our country. We cannot allow educational debt to hold back whole generations from the financial milestones that underpin the American Dream, like home ownership.”
The Good News
This study has certainly made waves and contained some jarring information. But while every situation is different, even if you’re a millennial saddled with student debt, owning a home reasonably soon might not out of reach at all! When talking about the 7-year delay in homeownership, it’s possible millennials are actually overestimating how much they really need to save for a down payment. Most millennials said that the minimum required down payment is 21%, according to a recent survey from national nonprofit NeighborWorks America – a figure that can actually be much lower.
By expanding homebuyer education, student loan debt counseling and spreading the word about down payment assistance initiatives, millennials can clear up confusion and improve access to affordable options. You certainly don’t have to give up on your American Dream!