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How Student Loan Debt Is Impacting Buyers

by Kelly Leighton on

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.


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