Student Loan Debt Threatens Housing Recovery

Written by Posted On Thursday, 20 February 2014 12:07

While in college, most students aren't paying on their student loans. But once they're out, those loan payments must begin and the housing situation they were in may no longer work for them.

So now they face a dilemma. Some may want to move out and no longer have roommates or they may want to live with a romantic interest. Renting is an option but some feel ready for a more significant commitment - they want a place of their own - they want it to be their own home.

The problem is that their student debt is consuming a good portion of their earnings, which makes it difficult to save for a downpayment. According to the National Association of REALTORS®, of the 20 percent of first-time buyers who found it difficult to save money for a downpayment, 54 percent blamed it on their student loan debt.

Sometimes the amount of the monthly payment to repay the student loan can disqualify a buyer. The massive student loan debt is causing college graduates to remain renters because they can't stash away enough cash for a downpayment.

These first-time buyers are vital to the housing industry. They accounted for nearly a third of the homes purchased in the past year. Housing prices and mortgage rates have crept up some, so it is practically impossible for these college grads to get into a home while prices and rates are still good.

The student loan debt is huge (roughly between $902 billion and $1 trillion in total outstanding student loan debt in the United States). That alarming figure is creating concern that the housing recovery will be impacted due to the lack of borrowing power by this group. Nearly 20 million Americans attend college and about 60 percent of them borrow annually to cover some or all of their costs. According to the Federal Reserve Board of New York, there are approximately 37 million student loan borrowers with outstanding student loans.

Part of the problem is that students aren't educated about buying a home when they're being offered student loans. They rack up a lot of debt to complete college but then get out of college and realize that debt is compromising other opportunities.

Some college grads are frustrated that they didn't receive more education about things such as learning about the qualifications needed to buy a home. While a college education is important and, in some cases, highly critical to a particular career, gaining an education about finances, investing, saving, balancing a checkbook, and buying a home, arguably can be equally vital not only to the individual but the core economics of society.

As we saw with the housing crisis, the less people know and understand about the housing market and the way mortgages work, the greater risk for them and the overall economy.

Educated and informed Americans can lead to Americans making wiser financial choices and ultimately a stronger economy.

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Phoebe Chongchua

Phoebe Chongchua is an award-winning journalist, an author, customer service trainer/speaker, and founder of Setting the Service Standard, a customer service training and consulting program offered by Live Fit Enterprises (LFE) based in San Diego, California. She is the publisher of Live Fit Magazine, an online publication that features information on real estate/finance, physical fitness, travel, and philanthropy. Her company, LFE, specializes in media services including marketing, PR, writing, commercials, corporate videos, customer service training, and keynotes & seminars. Visit her magazine website:

Phoebe's articles, feature stories, and columns appear in various publications including The Coast News, Del Mar Village Voice, Rancho Santa Fe Review, and Today's Local News in San Diego, as well as numerous Internet sites. She holds a California real estate license. Phoebe worked for KGTV/10News in San Diego as a Newscaster, Reporter and Community Affairs Specialist for more than a decade. Phoebe's writing is also featured in Donald Trump's book: The Best Real Estate Advice I Ever Received and The Complete Idiot’s Guide to Buying Foreclosures. She is the author of If the Trash Stinks, TAKE IT OUT! 14 Worriless Principles for Your Success.

Contact Phoebe at (858) 259-3646 or Visit for more information.

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