College graduates are more likely to be homeowners by their mid-20s than people without degrees regardless of student debt, according to new research from the Federal Reserve Bank of New York that reveals some of the effects of the $1.3 trillion in outstanding aggregate U.S. student loans.
Researchers for the New York Fed found that college attendance is associated with higher homeownership rates by age 25, regardless of whether the students took out debt.
That relationship held whether the students received a four-year degree or an associate degree, a notable finding given fears that the massive run-up in student debt could hamper many young people from making major purchases.
And homeownership rates are similar for college graduates from rich and poor areas, suggesting that “colleges may be successful in ‘leveling the playing field,'” New York Fed President William Dudley said Monday at a press briefing on the new figures.
The research also found that more debt meant less homeownership, a warning sign given that more people are borrowing more to go to school — recent borrowers have graduated from school with about $34,000 on average, up 70 percent in the past 10 years.
That finding points to the “potential longer-term negative implications” of rising student debt for overall consumer spending, Dudley said.
Nevertheless, even the group that usually gets the least out of college, people who take out debt to pursue an associate degree but then drop out before graduating, appear better off in general than people who don’t go to college. Those dropouts initially lag people who don’t go to college in terms of buying houses, but by age 33 their homeownership rate is about two years ahead.
The Fed researchers used a data set that combines anonymized credit data taken from the reporting bureau Equifax and education data from the National Student Clearinghouse.
The data shows that delinquencies and defaults on student loans remain highly elevated, nearly eight years after the end of the recession. Default rates among newer graduates appear to have fallen, however. Defaults on loans backed by the federal government should be lower, considering the programs available to cap payments as a share of incomes that were expanded by the Obama administration.
