While many young Americans aim to own a home one day, most have one massive obstacle to overcome: student loan debt.
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According to online real estate site Zillow, Americans’ ability to afford a home is meaningfully diminished by student loan debt. A renter earning median income without student loan debt, for example, could afford a home that costs as much as $361,800 – for a renter with debt, the maximum affordable price is $269,400. That pushes nearly half of all homes currently listed for sale across the country out of reach.
Outstanding student loan debt surpassed $1.5 trillion in 2018 – second only to mortgage debt – doubling over the past decade.
In some metropolitan areas, affordability is much more challenging for young prospective buyers. In Las Vegas, student debt reduces renters’ options by nearly half – to 29.3 percent from 57 percent. In Los Angeles, slightly more than 6 percent of home listings are financially within reach for individuals with student debt, compared to 13.5 percent without.
On the flip side, a renter with debt could afford more than 73 percent of listings in St. Louis.
Earlier this week, researchers from the Federal Reserve found that the homeownership rate among young Americans fell nine percentage points between 2005 and 2014 — and rising student debt accounted for about one-fifth of the overall decline during that time period.
If not for those increased student debt burdens, an additional 400,000 young Americans would have owned a home by 2014.
During the company’s fourth-quarter earnings call this week, JPMorgan Chase CEO Jamie Dimon said that a stronger U.S. credit profile would prevent a near-term recession from looking anything like the financial crisis in 2007. However, he did identify student loans as an at-risk area due to a “lack of discipline.” The banking executive also noted that because student debt is largely owned by the government, “the lender will not be there, so a lot of these borrowers are going to be stranded.”
The student loan crisis could come further into focus for Congress this year, too. Freshman Rep. Alexandria Ocasio-Cortez, D-N.Y., said she was excited to focus on it in her new role on the House Financial Services Committee, chaired by Rep. Maxine Waters, D-Calif. Waters is a staunch advocate for consumer protections.