How the Student Loan Crisis Affects the Housing Market

by Isaac Benmergui, Esq on April 15, 2013

SafeThe amount of student loan debt that you carry and whether or not you’ve defaulted on it, will affect your chances of buying your dream home. The current amount of outstanding student debt is nearly $1 trillion, and it’s beginning to affect the growth of the U.S. economy, says a new report from the New York Federal Reserve.

The number of borrowers is nearing 40 million nationally of which more than 40 percent are 25-year-olds. The average borrower owes $25,000 and roughly 6.7 million of all borrowers are behind three months or more in their payments.

“Delinquent student loan borrowers have a very difficult time accessing credit,” said Donghoon Lee, a senior economist for the New York Fed.

For homeowners trying to sell their homes, this is bad news. Younger people who have defaulted on their loans won’t be getting a home loan. In 2005, nearly nine percent of 25- to 30-year-olds with student debt were able to obtain a mortgage; that number is now hovers around four percent.

In 2005, 16 percent of those graduating with $100,000 or more in student loans were able to secure mortgage loans. That number is down to just 6 percent today.

“These are the people you’d expect to buy big houses,” said student loan expert Heather Jarvis. “They owe a lot because they have a lot of education…, but their payments are so significant, they have trouble getting a mortgage. They have mortgage-sized loans already.”

Getting Legal Help

The law offices of Isaac Benmergui can help you with your legal real estate needs; call 780-800-2510 or email for more information or to set up an appointment today.



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