Millennials’ Student Loan Debt Makes It Hard to Save For a Home Down Payment
According to the National Association of Realtors' (NAR) 2017 Home Buyer and Seller Generational Trends study released Tuesday, there has been an uptick in the number of generation Xers buying a home during the past year. Millennials, on the other hand, have struggled with making down payments on houses mostly due to student debt.
According to the NAR, 46 percent of millennials have student debt, with the average balance at $25,000. The average debt of millennials is lower than gen X borrowers, who owe around $30,000 on average, but the debt is still hurting their ability to purchase a home.
Among potential home buyers saving for a down payment, millennials are still having the roughest time. The NAR found that 55 percent of millennials said student loans were delaying their efforts to save for homes. That compares to just 29 percent of gen Xers and 9 percent of baby boomers.
"Repaying student debt also appears to be slowing some current homeowners who went to graduate school and now can no longer afford to sell and trade up because of their loans," said Lawrence Yun, the NAR Chief Economist in a press release announcing the study.
For countless millennial student loan borrowers, owning a home is simply out of grasp - even with an improving economy and better job prospects for a generation that has surpassed baby boomers in size.
It’s no secret that the more than $1.4 trillion in student loan debt the nation collectively owes is hurting all aspects of the economy, not just the borrowers' cash flow. Student loan borrowers are also putting off getting married, starting families, buying cars, saving for retirement, and starting their own businesses which has ramifications for the entire U.S. economy.
What’s more, a recent survey by LendEDU shows just how far borrowers would go to get out from the outsized debt. Take getting a knockout punch from Mike Tyson, as one example. Sure it’s probably going to result in a lot of medical bills, but if it meant no more student loans, 56.73 percent of survey respondents said they would do it. More than half of borrowers would also forgo social media forever, abstain from alcohol and drugs for life, and give up their caffeine addictions if it means they would never have to make student loan payments again. Not surprising only 6.47 percent of student loan borrowers would cut off their pinky finger, while 4.68 percent would move to Syria forever to get rid of their student loan debt, underscoring just how bad of problem it is.
Though there is no debate that student loan debt is an issue in the U.S., and that it holds many people back from progressing financially, the problem may be party the borrowers' faults. A recent LendEDU survey revealed just how little student loan borrowers truly know about their loans. Shockingly, nearly half of those surveyed thought that they would receive student loan forgiveness after graduation. Though this may be true for a small portion of graduates, it is alarming that so many students are depending on not having to pay back their debt.
This thinking causes students and recent graduates to forgo making a plan for successful student loan repayment. With no plan, and little knowledge about their loans in general, borrowers usually cannot successfully repay their debt - often leading to default. Though having excess student debt can make it difficult to purchase a home, having a student loan default on record makes it even harder.