Millennials today aren’t buying homes at nearly the same rates as previously, according to researchers at the Federal Reserve, driven partially by their ballooning student loan debt.
Approximately 20 percent of the decline in home ownership among millennials is attributable to student loan debt, researchers report.
Many other factors particular to this group also play a factor, including millennials’ tendency to settle in cities — where family homes may be less concentrated. Millennials are also more likely to switch jobs or industries than their elders, so they may be slower to put down roots.
About 36 percent of household heads aged 24 to 32 owned homes in 2014, versus 45 percent of the same age group in 2005.
Outstanding student loan debt has doubled to about $1.5 trillion in the last decade, with average real student loan debt per capita rising from $5,000 in 2005 to $10,000 in 2014.
Student loan debt early in life harms credit scores later in life, the study’s authors note, making it more difficult for graduated young professionals to obtain mortgages.
“This finding has implications well beyond homeownership, as credit scores impact consumers’ access to and cost of nearly all kinds of credit, including auto loans and credit cards,” Fed Board authors Alvaro Mezza, Daniel Ringo, and Kamila Sommer write.
“While investing in postsecondary education continues to yield, on average, positive and substantial returns, burdensome student loan debt levels may be lessening these benefits.
The researchers recommend that policymakers work to “reduce the cost of tuition” and consider “more expansive use of income-driven repayment” plans — monthly repayment plans calculated based on income and family size.
Kate Hardiman is a contributor to Red Alert Politics. She is pursuing a master’s in education from Notre Dame University and teaches English and religion at a high school in Chicago.
