Americans owe $1.5 trillion in student loan debt. With the average graduate in the class of 2017 owing $40,000, it can feel like a huge anchor preventing homeownership for the rest of their lives.
The reality is that homeownership levels between those who owe student loan debt and those that don't evens up in their 30s.
In 2017, the Federal Reserve issued a report that said that for every $1,000 of student loan debt, homeownership was delayed by 2.5 months. That means that that average graduate will be delayed by about 100 months or over 8 years in their dream of owning a home.
Some changes are making student loan debts less burdensome. Longer payment periods, higher incomes, and lower payment to income ratios are all making student loan a bit less of an anchor to home ownership.
Millennials invested a great deal into education, and they are starting to see the payoff. The median income for the Millennial generation is higher already when compared to Baby Boomers and will soon surpass Generation X.
The biggest barriers to homeownership, according for First Am's Real Estate Sentiment Index, isn't debt. It's lack of inventory and overall high prices. There are also lots of misunderstandings about the size of down payment needed to purchase a home.
There are several ways to overcome the high debt issues that student loans cause:
- Get a good grasp on your debt-to-earnings ratio, your complete debt portfolio, and your FICO score. Pay off the easy stuff so that you aren't carrying unnecessary debt.
- Look at any of the many down payment assistance programs. You might find yourself not having to pay any down payment.
- Look at shared equity for the down payment.
If homeownership is a dream that you have, even with student loan debt, it's worth exploring your options. There is a good chance that you can own a home even with that monthly payment.