Student Loans Vs Home Ownership By Young Adults

by staff on February 23, 2014

Age of Home OwnersLately the press has taken up the issues regarding student loans as they affect a young generation of potential homebuyers.  This isn’t a silly issue.  It impacts you and me right now, regardless of whether we have loans or children.   Did you know that the largest source of non-home-mortgage or home-equity-debt right now…  is student loans?  The impact of student debt has already begun to trickle through various sectors of our economy, such as housing and car sales.  We’re willing to bet that you already know of someone who has enormous college debt and still lives with his/her parents while trying to gain a foothold in the workplace.

The Bureau of Labor and Statistics states that 74.8% of people aged 25-34 are employed.  That’s the glass half full.  The other glass has 1 in 4 young people unemployed, which makes it impossible for them to save for any kind of future investments.  As in, they’re living with parents or friends, often ending up in the rental market by default.

A student who’s accepted significant indebtness in order to gain an education, not only requires employment to begin repaying the debt,  but also that debt load disqualifies them from taking on additional loans such as home mortgages or car loans.    As folks voice concern about student debt and the ability to achieve home ownership, there’s a point taken that perhaps non-college career options make more financial sense.  And yet most studies show that college graduates out-earn nongraduates 2  to 1 during their working years.  Translated this could mean that even a smaller debt load for technical training can be equally difficult to repay when the debt is adjusted for the earning potential.

This is a very comprehensive look at education debt in various types of universities and for various types of degrees… associates, bachelors etc.   Many universities are adjusting their fees for tuition and classes, so that not all classes cost the same amount.  Basically the more advanced the student becomes, the higher the tuition and fees.  So even though the student may earn more with an advanced degree, he/she also likely has borrowed more than other students.

As a nation, we’re close to a $Trillion dollars in debt with student loans.   Many student loans are being backed by the federal government, a practice that’s reminiscent of the housing bubble we endured just a few years ago.  Student loans can end up in outright default of payment (approximately 12.3% of federal loans at last count) or they can be held in a ‘deferred’ status…. and that’s become a whopping 43.5% of all student loans.  If you want to see the levels of student loan defaults in various categories CLICK HERE.

So when you dream of Your Son The Doctor… consider that in 2012, average student debt was estimated at $27,253.  More than 1.2 million people had student loan debt over $100,000.  By any measurement it takes awhile to repay that level of indebtedness.

If you’ve got a young relative who’s contemplating a potential level of student loan indebtedness, consider this.   Though we all know that college students come in all ages, a 2012 National Survey on Drug Use and Health highlights that 14% of college students reported binge drinking at least 5 times in the past month.     14% of college students reported drinking 10 or more drinks in a row at least once in the last 14 days, with 5% of them saying they consumed 15 or more drinks in a row.   Hopefully your relative is among the other 76% who’re paying attention to that student debt and not adding hundreds or thousands of dollars a year in other college ‘expenses’.  After all, we want to help them get their own homes some day.

Comments on this entry are closed.

Previous post:

Next post: