ICFE eNEWS #19-10 - March 6th 2019
Heavy Student Loan Debt Forces Many Millennials To Delay Buying Homes
Heard on All Things Considered
February 1, 20191:33 PM ET
Student loan debt in the United States has more than doubled
over the past decade to about $1.5 trillion, and the Federal
Reserve now estimates that it is cutting into millennials'
ability to buy homes.
Homeownership rates for people ages 24 to 32 dropped nearly 9
percentage points between 2005 and 2014 — effectively driving
down homeownership rates overall. In January, the Fed estimated
20 percent of that decline is attributable to student loan debt.
Whether that will shift with time as the millennial generation
marries and has children is the big economic question.
That's also a big question for Michael McHale, who says as a
child, he pictured a suburban, picket-fenced home he eventually
wanted to own. "I can remember wanting that since I was 6, 7 or
8," he says.
But at age 31, McHale isn't living that dream. Instead, he and
his wife rent in Danbury, Conn., an hour's drive from the
elementary school where he teaches, across the state line in New
Not owning a home makes him feel he has made a mistake that has
kept him short of a key milestone — and his piece of the
American dream. McHale says he feels trapped by his and his
wife's combined $1,200 monthly student loan bills, which prevent
them from saving enough for a down payment.
And he says renting means he isn't free to plan his life, even
as their first child — a boy — is on the way. One example:
decorating the baby's nursery. "We can't really make any actual
changes. We can't really paint too much," McHale says.
Student Loan Debt Is Steadily Rising
"It seems like there's like a debt spiral or something. When you
get into a little bit of it, it just feeds back in on itself,
and for us that started with student loans — that was our first
debt," he says.
It feels especially bad when he compares himself with his
father's generation. Neither his father nor his uncles were
burdened by student loans. "They all owned a house and had their
full-time jobs by the time they were like 21," McHale says.
Yet many economists say this younger generation will eventually
be able to buy — just later than previous generations.
"It's not that they're not going to buy homes. It's just that
they'll purchase these homes later in life," says Odeta Kushi,
deputy chief economist at real estate research firm First
Baby boomers were 25, on average, when they purchased their
first homes; millennials, by comparison, are waiting almost a
decade longer, Kushi says.
Many factors are contributing to this delay: People are staying
in school longer, delaying marriage and having children later.
This generation is just starting to buy homes, and Kushi expects
to see a wave of young buyers in coming years.
"This generation will still yield the wealth benefits from
becoming a homeowner, which I think is the key point," she says.
This might already be starting to happen.
In the past two years, homeownership rates have increased
largely because of young buyers, who are benefiting from the
good economy, says Jonathan Spader, a researcher at Harvard
University's Joint Center for Housing Studies.
"Student loan debt is still a headwind, but they're at least
being buoyed by stronger incomes and employment," he says.
People with degrees have higher incomes, which offset the debt
burden. But it's also true that people are taking longer to get
their degrees, and many don't finish school.
"Approximately 40 percent of those who start college do not
finish within six years. ... That's a huge number," says Laurie
Goodman, co-director of the Housing Finance Policy Center at the
For those people, it is the worst of all worlds — they have the
school debt without the higher wages to show for it.
Christina Ward did finish her schooling, but her chosen
profession in social work doesn't pay enough for her to overcome
her student debt.
"I thought that I would be able to at least make enough money to
make the payments, which wasn't true at all," she says.
Ward racked up nearly $200,000 in loans for college and graduate
school. Then she was laid off in December. At 36, she moved back
into her parents' apartment in Newark, N.J.
Ward says she and her girlfriend have had to postpone not just
buying a house; her girlfriend is also putting off her graduate
"We definitely wanted to get married, and that's probably going
to end up taking priority over the house, because you can't
afford both," Ward says.
But at the moment, there's no target date for getting married
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Paul S. Richard
President - Executive Director
Institute of Consumer Financial Education (ICFE)
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