How Student Loan Debt Is Impacting Buyers

Student loan debt has been impacting people, specifically millennials and now Generation Z, for years, affecting their plans to become homeowners.

A recent report from NAR, The Impact of Student Loan Debt, explores just how impacted consumers are by the debt and how it is influencing their decisions. Twenty-nine percent of respondents with student loan debt reported it has impacted their ability to purchase a home, while 15% said it has limited their ability to rent alone or change their living circumstances. Not surprisingly, millennials were the biggest generation of non-owners to feel as if their student loan debt is holding them back from buying, at 60%. Half of non-homeowners said student loan debt has delayed them from buying a home. For non-owners, Hispanics are the most likely to say it has impacted their ability to buy a home, at 53%, followed by White respondents, at 52% and then Black respondents at 43%.

Forty-three percent of Black homebuyers reported student loan debt, with a median amount of $40,000. Only 16% of Asian/Pacific Islander homebuyers had debt, but they had the largest median amount at $42,600. Among White buyers, 21% had student debt with a median amount of $30,000 and Hispanic/Latino buyers had the lowest median of student debt at $20,000, representing 24%. Regardless of family help or race, those with student loan debt typically buy a home that is 19% less than other buyers.

Seventy-seven percent of respondents who took on student loan debt said they did not have a good understanding of the consequences at the time of taking a loan. But two-thirds said they understood somewhat what their potential earnings could be. Specifically, Generation Z and millennials were more likely to say they had an understanding compared to Generation X and baby boomers. Men were more likely than women to report they understood, at 76% compared to 59%. Those making more income were more likely to say they had a good understanding of their earning potential in college. Homeowners were more likely than renters to say they understood post-graduate earning potential.

One silver lining of the pandemic is that 38% of people with student loan debt said the pandemic helped them get closer to paying off their debt, however, 54% said it did not get them any closer. More than a quarter of people still paying student loan debts said it has been more than a decade sine they finished school, and are still paying it off, while 36% have been finished for four years to a decade.

After the loans are paid off, 24% said they would purchase a home. For those who have paid off their debt within the past two years, 13% reported buying a home.