Young adults seek college degrees in order to secure well-paying jobs that help establish future financial stability, including fulfilling the dream of home ownership. Too often, however, college graduates are finding student loan debt is hindering their future goals.
A recent study by the National Association of Realtors and SALT, a consumer literacy program provided by the nonprofit American Student Assistance, has found older millennials between the ages of 26 and 35 are carrying sizable student loan debts. With balances between $70,000 and $100,000 still remaining on years-old loans, this demographic's ability to buy a home is greatly compromised.
While other factors have contributed to the decline in the housing market, a report released in August 2017 by the U.S. Federal Reserve Bank of New York explains that student debt accounts for up to 35 percent of the decline. Roughly 32 percent of people in their 20s owned a home in 2007, but that number dropped to 21 percent in 2016. Respondents to various surveys, including those by NAR and Pew Research Center, have said that student loans have made it more difficult to buy homes.
This is not the only potential pitfall of student loans. Considerable student loan debt may also contribute to weaker spending among young adults and less wealth accumulation through the years. It may also delay travel plans, marriage plans and other large purchases that are often the markers of an established and secure future.
The Federal Reserve Bank report suggests that every additional $10,000 in student debt is associated with a 1.5 percentage point decline in the probability of buying a home by the age of 30. Furthermore, the report also states that almost half of people between the ages of 23 and 25 are still living with their parents.
Of those who were able to purchase a home, they are still carrying a median student debt of $41,200, says American Student Assistance. That figure actually surpasses the average annual income of $38,800.
"The tens of thousands of dollars many millennials needed to borrow to earn a college degree have come at a financial and emotional cost that's influencing millennials' housing choices and other major life decisions," said Lawrence Yun, NAR chief economist.
Student loan debt may be compelling some millennials to take second jobs, work in careers outside of their fields of study and delay marriage and starting a family. Student loan debt also is affecting millennials' ability to save for retirement. The NAR report found that 61 percent of respondents at times were not able to make retirement contributions.
Consolidation of student loans, refinancing for lower interest rates or extending the term of the loan to make payments more amenable are ways to alleviate some of the burden of student loan debt. Flexible payment plans and better loan counseling can help as well.
Many millennials are finding that student loan debt is compromising their ability to secure their financial futures, which can have far-reaching consequences.
