Millennials saddled with student loan debt are delaying buying homes by about seven years, according to a new study released by the National Association of Realtors® and nonprofit American Student Assistance®.
The survey looked at how student debt was affecting the financial decisions of millennials, including retirement savings, additional education pursuits, career changes, and marriage and family decisions.
Results indicate that only about one-fifth of millennials own a home. Of those who do not, roughly 80 percent say that their student loans are big reason why they have not purchased a home. More than 80 percent of those surveyed did not expect to buy a home in the next three years, and the median wait time was seven years.
The survey also found that the average student debt load was just over $41,000 while the average annual income was just under $39,000. About four-fifths borrowed money for college, and roughly half are carrying loan balances of more than $40,000.
Real estate experts are worried that the lifecycle of the housing market will be negatively impacted by the $1.4 trillion of student debt in this country. Besides a long delay to entering the home-ownership ranks at all, other millennials are failing to upsize their current smaller homes due to the same student debt issues. These two factors combined means that the lower-end homes will be in short-supply, making the problem worse.
Besides postponing home purchases, student debt was found to affect other financial decisions such as changing careers, taking a second job, delaying higher education and starting a family. Saving for retirement has also dropped lower and lower on the priority list for millennials. More than 60 percent of those surveyed said they have skipped making a contribution to their retirement savings while about one-third have made lower payments than planned.
The combination of not being able to invest in a home or save for retirement can have potentially negative long-term effects on this generation. Experts are concerned that bigger picture issues may include a weakening overall economy and greater financial inequality.
Moving forward, future college students need to have a better understanding of the costs of college including tuition, room and board, books and fees. They need to appreciate the debt load they are taking on, the amount of time repayment may take, and how the debt may impact future financial decisions.
In addition, consumers, policy leaders and the private sector must help millennials find manageable ways to repay their debt so they can move on with the rest of their lives. Simplifying and clarifying the loan process as well as revising traditional underwriting rules can help. Currently, it can be difficult for someone with student debt to obtain a mortgage.
The 41-question survey was distributed to more than 92,000 student loan borrowers between the ages of 22 and 35 who are making repayments. Just over 2,200 participated in the Spring 2017 survey.