As homeownership in the U.S. drops, many blame large student debt for crippling first-time buyers’ ability to own a home. As students graduate and face loan repayment, the thinking goes, they can’t afford to take out a home mortgage.
There is truth in that observation. But here’s a fact many have overlooked: Over time, those with student debt catch up to those without. The real drag on homeownership, notes a new study, occurs among those who don’t have a college education.
“Those who borrow for college do have a slower start to homeownership than those who went to college debt-free,” notes Dynarski. “This makes sense: loan payments add to the monthly debt-to-income ratio that determines eligibility for a mortgage. But by the time people are in their thirties, when the typical borrower would have finished paying off her student loans, the home ownership rates of the two college-educated groups are statistically indistinguishable. The striking, large gap is between the college-educated and those who stopped with high school.”
Dynarski’s study found that when people are in their early twenties, those who did not attend college are most likely to own a home because they have been working since high school and are beginning to settle down. Their college-educated counterparts are just entering the labor force.
“The college-educated catch up fast, though, and have higher rates of home ownership by age 27. By age 35, the gap in homeownership between those with and without a college education is about 14 percentage points.”
In sum, while student debt clearly affects a person’s ability to buy a home, such a drag on their housing options is only temporary. The new data offers a clear verdict, according to Dynarski: “The college-educated—even those with student debt—are winners in our economy.”