The burden of student loan debt is causing many young Americans to delay major financial life decisions, including home buying. Meanwhile, among millennials who do own homes, many say student debt prevents them from upgrading their home purchases.
Delayed home purchases can cause ripple-effects in the economy, so in response, state governments and companies are making efforts to step in to combat dropping homeownership alongside mounting student debt.
In late February, a state representative in Pennsylvania said he would introduce legislation for individuals and couples with student loan debt to obtain a zero-interest mortgage, to be used against the buyer’s student loan debt. The catch? They would be required to buy a home from (or take out a mortgage with) the Pennsylvania Housing Finance Agency’s real estate-owned portfolio.
Pennsylvania is just the latest example of homebuyer initiatives targeting burdened student loan borrowers. In fact, this isn’t the first time lawmakers and influencers have tried to push a student loan homebuyer solution.
In May 2017, New York launched its Graduate to Homeownership program. The program offered subsidized mortgages and up to $15,000 in down-payment assistance to recent graduates for the purchase of homes in several upstate New York areas taking part in downtown-revitalization programs.
Additionally, Ohio was one of the first states to realize the crippling effects of reduced home ownership for younger generations. In 2009, Ohio’s Housing Finance Agency launched Grants for Grads, which offers down payment assistance and discounted mortgage interest rates to recent college graduates who purchase homes in the state.
Home buyer assistance hasn’t been coming from just the government either.
A Lennar subsidiary, mortgage lender Eagle Home Mortgage, introduced a program in the fall of 2017 that could help student loan borrowers pay off their debt. Eagle Home Mortgage’s Student Loan Debt Mortgage Program offered borrowers as much as $13,000 towards student loan debt. By using the program, borrowers who purchased a new home from Lennar could direct up to 3 percent of the purchase price to pay off student loans.
All of these programs hoped to combat discouraging statistics for millennial homebuyers. For example, a joint study by the National Association of Realtors and American Student Assistance found that most millennials with student loans don’t own a home, and these loan holders typically delay home buying by up to seven years. Currently, total student loan debt exceeds $1.4 trillion shared by over 45 million borrowers.
Author: Mike Brown
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