“the Intersection Of Student Loans And Mental Health” – Growing student loan burdens over the past decade have contributed to a decline in homeownership for young adults.
The benefits of owning a home in the United States cannot be overstated. The housing market in the United States reflects and leads to wider rifts in American society; Home ownership is a functional prerequisite for financial security. The Federal Reserve’s latest Survey of Consumer Finances found large wealth disparities based on housing status: In 2019, the median net worth of homeowners was $255,000, while the median net worth of renters or others was just $6,300. While it’s clear that homeownership has a significant economic impact on individuals as well as the economy as a whole, evidence shows that the United States has yet to regain the total housing wealth it lost during the Great Recession.
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The U.S. Census Bureau’s historical tables on housing vacancy and homeownership confirm that the decline in homeownership is even more pronounced for young adults. From the first quarter of 2007 to 2019, the homeownership rate for people under 35 dropped 15 percent, from 41.7 percent to 35.4 percent.
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During this same period, ever-rising tuition and fees, worsening income inequality, and shrinking state funding for higher education have burdened an entire generation with unprecedented amounts of student loan debt. While the student loan crisis is the subject of much research—well documented in previous posts on the Millennial Student Loan Project—few have studied the impact of this crisis on homeownership among young adults. By analyzing a ten-year range of credit bureau data (2009–2019) for student loan borrowers between 18 and 35, we explore trends in homeownership for student loan borrowers and the relationship between homeownership rates and student loan debt balances.
Overall, our research shows that the homeownership rate for young adults with student loans has declined over the past ten years. Additionally, we found that individuals with high amounts of student loan debt are less likely to become homeowners, especially among borrowers with relatively high incomes. This finding is particularly troubling because the increase in median student loan debt has outstripped that of average income levels. The disparity in student loan debt and median income is evident for all borrowers but is particularly pronounced for those living in black-majority communities.
We also find that despite having the lowest initial homeownership rates, individuals living in predominantly Asian, Black, and Latino communities also experienced the largest declines in homeownership from 2009 to 2019. In addition to student loan debt, there are many other factors that can occur. Home ownership among young adults has been affected in recent years, for example, by rising home prices and increasing preferences for mobility over stability. These explanations deserve attention and inquiry but are beyond the scope of this post.
It seems clear that those who carry more student loan debt, all other things being equal, are less likely to become homeowners. But there are many skeptics who contest the hypothesis that the recent decline in homeownership rates may be partly due to rising student loan debt. Some of these skeptics, relying on studies using older data that fail to capture recent developments in student loan debt, claim that rising student loan debt has had no effect on homeownership rates. Others argue that there is no way to reduce the amount of student debt without reducing their access to higher education, so it is difficult to estimate the relationship between student loan debt and home ownership, even controlling for income and/or education. Contrary to these positions, our analysis of the relationship between student debt and homeownership—using the most up-to-date and robust data available—shows that rising student loan debt prevents borrowers from purchasing homes. Furthermore, we find that the adverse effects of student loan debt on homeownership are most pronounced for relatively high-income borrowers whose debt balances continue to grow over time. Low-income borrowers face additional barriers to home ownership due to restricted access to credit. While college is still the primary means by which people can secure and improve their socioeconomic status, the rise of student debt poses a major barrier to purchasing a home—a step, especially in the United States, that many consider necessary for long-term finances. stability.
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For this project, we used a dataset consisting of individual credit bureau cross-sectional data combined with demographic data reported from the American Community Survey using individuals’ US Census tracts. For the cross-section data, one million borrowers between the ages of 18 and 35 were independently sampled each year from 2009 to 2019. For the purposes of this study, we analyzed only borrowers with student loan balances of $500 or more. .
From these annual samples, we analyzed consumer-level data on student loan debt, mortgage debt, total debt, and debt-to-income ratios.
Overall, we find that borrowers with more student loan debt are less likely to become homeowners. We show this at the state level in Figure 1, which maps each state’s homeownership rate and average student loan debt in 2019. Most of the states with the highest average amount of student loan debt have the lowest homeownership rates, while those with the lowest average student loan debt have the highest homeownership rates.
Looking at ten-year trends, we find that the homeownership rate among student borrowers, measured as the share of individuals with an outstanding mortgage loan balance,
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From 2009 to 2019, it decreased by 24 percent. This decline exists among all borrowers, but, as shown in Table 1, the most negatively affected borrowers live in Asian- and black-majority U.S. census tracts, where rates fell by 47.7 percent. and 40.6 percent respectively.
Overall, we see that our sample of student loan borrowers in 2019 had a significantly lower homeownership rate (18.6 percent) than all households under 35 (35.4 percent).
What are the other characteristics of borrowers who have experienced declining home ownership rates? First, we look at total student loan debt from 2009 to 2019 and homeownership rates for borrowers with different levels of total estimated income, all in inflation-adjusted 2019 dollars.
Figures 2 and 3 show the average annual homeownership rate for five different levels of total student loan debt. Most surprisingly, we find that the homeownership rate never rose above 1.2 percent over the ten-year period for borrowers with estimated incomes below $100,000 (Figure 2). Compared to the overall homeownership rate of 35.4 percent for those under 35, the unusually low homeownership rate for low-income student borrowers in this age group is striking — and in line with research that shows homeownership is declining for younger young adults. End of wealth and income distribution. By examining borrowers with estimated incomes of $100,000 or more, we are able to clearly understand the relationship between debt and homeownership. In each year of our study, higher student loan debt corresponds to lower homeownership, and the homeownership rate gap widens for each increasing level of student loan debt.
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In conjunction with these trends, we find that recent cohorts of student loan borrowers also have lower estimated incomes than their predecessors. In 2009, 42 percent of our independent sample of 18- to 35-year-olds had an estimated income of $100,000 or more; In 2019, that share was reduced to 31 percent. Indeed, Figure 4 shows the annual change in group income by comparing the median income of the bottom 50 percent and the next 40 percent (51st to 90th percentile) of the income distribution for each year we sampled. The median income of the bottom half of the income distribution fell from $41,600 in 2009 to $36,300 in 2019. For the other 40 percent of distributions, the average dropped from $141,200 to $103,300. These findings are consistent. Research shows that education is not paying off.
Several troubling implications flow from these findings. First, the student loan borrowing population is getting poorer, meaning that borrowing for college is becoming more prevalent, harder to sustain, and nearly impossible to afford. Second, the “earnings premium” assumption that justifies the burden of student loans is increasingly incorrect. A more holistic view that includes more than income—for example, owning a home—illustrates how student loan debt can negatively impact even upper-middle-class borrowers. Third, because of persistent racial wealth disparities, black students borrow more—relative to total and income—to attend college than white students. And despite certification with a college degree, certain demographic groups still suffer the consequences of wage inequality—the returns to a college education vary for different racial and income groups. For further confirmation, we revisit Table 1 and see that Asian-, black-, and Latino-majority census tracts all saw large declines in homeownership rates—more so than their white counterparts.
For a more in-depth analysis of the interrelationship between student loan debt, homeownership, and total income, we examined homeownership by the distribution of student loans for individuals in three income percentile categories in 2009 and 2019. We independently calculated student loan percentages for each. Year and percentage assigned to each borrower. We then grouped the borrowers based on their
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