Student Loan Debt Causes Delay in Home-Buying for Millennials

6/29/2015 11:42:00 AM

Increasing student loan debt for younger consumers correlates with delays in buying a home and other significant life events such as marriage and having children.


Student loan debt continues to increase in the U.S. and it has more than doubled for consumers younger than 30, according to new research and analysis from Equifax. As a result, those consumers are not borrowing money to buy homes at the rate they were a decade ago—a trend that may have as much to do with high levels of student debt and poor job prospects as it has to do with the housing bust during The Great Recession, Equifax reported in a news release.

In 2004, consumers younger than 30 in the U.S. had $146 billion in student loan debt and it more than doubled to $369 billion by 2014, according to Equifax.

“Equifax data suggests that the conventional theory—Millennials are the rental generation and uninterested in home ownership—is only a part of the story,” said Dennis Carlson, deputy chief economist in Equifax, in the news release. “Importantly, large amounts of student debt and less than stellar job prospects for recent college graduates make the dream of home ownership shine less brightly than in the past. But we also see indications that they will eventually want the family, the car and the house that older generations desired, just with a significant delay.”

Equifax also reported, based on data from the Federal Reserve Bank of New York Survey of Consumer Expectations, that the top answer from renters asked why they have not purchased a home is they have “too much debt/not saved enough.”

The research from Equifax also shows the impact of employment rates and income on student loan payments and delinquency.

Consumers earning less than $30,000 are at the highest risk for delinquency, according to Equifax. The delinquency rate is reduced by 20 percent with each additional $10,000 of income, a phenomenon that demonstrates the strain of student debt puts on young consumers starting their careers.

While steady employment helps, Equifax data also indicate that young workers struggle to make timely payments on their student loans even as late as four years into a job, where older workers see improvement in payment performance.

Student loan debt is also impacting other financial decisions for consumers and milestones such as marriage and having children, according to an article from USA Today.

People with student debt are ”postponing marriage, childbearing and home purchases, and … pretty evidently limiting the percentage of young people who start a business or try to do something entrepreneurial,” said Mitch Daniels, president of Purdue University, in the article. “Every citizen and taxpayer should be concerned about it.”

Homeownership for consumers younger than age 35 has declined from 43.3 percent in the first quarter of 2005 to 34.6 percent in the first quarter of 2015, according to the article and data from the U.S. Census Bureau.

And, according to data in the article from the Centers for Disease Control and Prevention, the median age for a first birth is 26. The birth rate among women ages 20 to 29 is now at a record low and has declined since at least 2008, according to the article.

USA Today also reports student loan debt for consumers now is impacting their ability to save for retirement as well as the overall economy.

Read more in the article here.

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