When many of us think of the impacts of debt, we tend to discount student loan debt. At least, that used to be what happened in the past. Now, with student loan debt on the rise as the cost of attending school increases and scholarship availability decreases, many young adults are finding that the ability to get on with their lives is hampered.
A recent CNN Money article reports that home purchases have declined 8% in recent years among Americans between the ages of 20 and 39. With student loan debt rising, it’s harder and harder for some Gen Xers and Millennials to feel comfortable about adding more debt to the picture with a mortgage.
The CNN Money article reports on data that indicates that every $250 a month in student loan debt a household has to pay, the ability to purchase a home is reduced by $44,000. That means that someone with a student loan payment of $500 a month sees a reduction in home purchasing power of $88,000. Even with home prices near recent lows, that’s still a pretty big hit. A would-be home buyer might want a home costing $200,000, but might be limited to one costing $112,000 because of student loan debt. That’s a big difference.
Of course, student loans might not be the only reason young adults might be putting off home ownership. Later marriage ages might mean young people are putting off buying family homes because they aren’t starting families. Additionally, shifts in attitudes that favor a more nomadic lifestyle among Millennials could mean that buying a home and getting tied down is no longer desirable.
Have you put off a home purchase recently? Why or why not?