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Student Debt Up, Homeownership Down

student debtIt can seem overwhelming when realizing that getting a degree to make more money in the workforce can lead to student debt that you’re using your money on to pay off. It’s a vicious cycle. The Consumer Financial Protection Bureau recently released data that shows nearly half of school borrowers are bogged down with at least $20,000 of student debt—double what it was 10 years ago.

Their research also found that more borrowers are taking out student loans later on in life with fewer individuals paying the loan down in five years. The record breaking student debt and the stress that comes along with it are spurring more employers to offer student loan repayment benefits to their employees—something that might also help with homeownership rates.

The Fed released a study in July discussing the connection between student debt and homeownership. When debt loads increase and individuals paychecks aren’t big enough to cover it, home buying tends to go on the back-burner. The Fed reported that as much as 35 percent of the decline in young American homeownership from 2007 to 2015 is due to the higher student debt loads.

To get a view of what might have been, the paper suggests that if tuition had stayed at 2001 levels, 360,000 additional American’s would have owned homes in 2015. That means about 2.9 million more 28- to 30-year-old homeowners. According to the CFPB, half of student borrowers are older than 34 when they begin to pay off their loans.

“Since 2003, the percentage of borrowers starting repayment over the age of 34 has doubled, increasing from 25 percent to nearly 50 percent,” the report noted. “The study also found the percentage of consumers beginning repayment under the age of 25 has decreased from 30 percent to 15 percent.”

The good news is companies are beginning to recognize that student debt can push its way into the rest of consumers’ financial lives, including getting a home.

“Borrowers may save hundreds or thousands of dollars in interest payments over the life of a loan when employers prepay student debt,” it said. “For example, with a 10-year, $30,000 loan at 6 percent interest, an employer paying $100 a month will save the borrower more than $11,000 over the life of the loan.”

About Author: Brianna Gilpin

Brianna Gilpin, Online Editor for MReport and DS News, is a graduate of Texas A&M University where she received her B.A. in Telecommunication Media Studies. Gilpin previously worked at Hearst Media, one of the nation's leading diversified media and information services companies. To contact Gilpin, email [email protected].

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