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Student Loan Debt

Among recent home buyers, nearly one-quarter of all home buyers, and 37% of first-time buyers, have student loan debt, with a typical amount of $30,000. Even more troubling, 61% of non-homeowning millennials said that student loan debt is delaying their ability to buy a home. According to a recent NAR study on student loan debt, 51% of all student loan holders say their debt delayed them from purchasing a home. Thirty-six percent of student loan debt holders say student loan debt delayed their decision to move out of a family member's home, a percentage that rises to 52% among Black debt holders.

To address the growing debt burden, NAR supports a multipronged approach. Financial education should be expanded to aid students as they face decisions about financing their education, while aid programs should be simplified. For those who hold debt, opportunities to consolidate and refinance debt at lower rates would help debt holders lower monthly debt payments, make large purchases, and make wise life choices. Finally, NAR favors expanding tax preferences for employers who assist employees with their student debt as well as tax forgiveness for debt holders who have their debt forgiven or paid off by their employer.

See References for more information.

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Advocacy

What is the fundamental issue?

Research continues to indicate that the continued rise in student debt along with a weak labor market has a long-term impact on the ability of first-time homebuyers, particularly lower income consumers, to qualify for mortgages. Many of these potential borrowers find a significant portion of their total monthly debt is comprised of student loan payments. Additionally, lower price point homes available to purchase are at historical lows which further price out potential buyers with student loan debt as home prices continue to rise. While much of the research and focus has been on the impact to Millennial borrowers, new studies are showing that student loan debt burdens borrowers of all generations, including Baby Boomers and Generation-X consumers who are shouldering the weight of the student debt for their children or their own after returning to college post-recession.

I am a real estate professional. What does this mean for my business?

NAR research indicates that student debt negatively impacts the ability of potential home buyers to save for or meet down payment requirements. Student debt is also having an impact on potential homebuyers’ ability to qualify for a home due to high debt-to-income levels. These factors have limited their access to affordable mortgage options needed to purchase a home. Though a vast majority of borrowers have been responsible and diligent in making their student loan payments, their ability to save for priorities such as emergency savings, medical expenses, and down payments have become more difficult and impact their decisions such as purchasing a home.

NAR Policy:

NAR strongly supports policy proposals to allow student loan borrowers to refinance into lower interest rates and to streamline loan programs. Additionally, NAR supports policy proposals that promote student loan simplification, clarity and education. Further, NAR supports policies that provide tax relief to student debt holders, as well as to employers who choose to assist with their employees' student loan debt burdens. In addition, NAR supports policies that provide tax relief to those borrowers with forgiven student debt. NAR also shall ensure that mortgage underwriting guidelines related to student loan debt are standardized and do not impair homeownership.

Legislative/Regulatory Status/Outlook

In the last Congressional session, lawmakers in both parties proposed changes to the student loan program to deal with the large outstanding debt.

Democrats backed measures that would cap the burden on borrowers. Republicans argued that college graduates earn more than non-graduates and should be able to pay off their loans. However, Republicans were willing to simplify the federal loan system and they advocate giving borrowers more clarity about the debt and their ability to pay it back. Also, some Members of Congress seemed interested in tax changes to assist those paying off student loans. 

The CARES Act, passed during the pandemic, allows employers to pay up to $5,250 toward student loans on behalf of employees while the employees would not owe U.S. federal income taxes on the payments. This plan has been extended to 2025. While take-up of the plan has been slow to start, the incentive may become more attractive to employers as they try to attract talent in the current, turbulent job market.

The Adminstration and relevant agencies continue to make changes to the Public Service Loan Forgiveness program which relieves federal student loans for those serving at non-profits or in public service. Further reforms and changes to this program and other federal loan programs are being undertaken now with policy changes to be announced early in 2022.

In response to the COVID-19 pandemic, the Department of Education has paused federal student loan payments, with the latest pause extended through May 2022. Future pauses are unlikely though will be evaluated as the economy recovers.

The Biden Administration continues to evaluate its options for student debt relief. The progressive block of the Democratic party is pushing for some form of student debt cancelation, with some calling for all student debt to be relieved and others setting a cap. The Administration for now has been reluctant to make any big changes aside from changes to current loan programs.

NAR Committee:

Conventional Financing and Policy Committee

Current Legislation/Regulation

None at this time.

In-Depth

Letters to Congress
Letters to federal agencies
Issue summary
NAR Federal Issues Tracker

Legislative Contact(s):

Ken Fears
kfears@nar.realtor
202-383-1066

Matt Emery
MEmery@nar.realtor
202-383-1212

Regulatory Contact(s):

Ken Fears
kfears@nar.realtor
202-383-1066

Matt Emery
MEmery@nar.realtor
202-383-1212

References

We've already done the research for you. References (formerly Field Guides) offer links to articles, eBooks, websites, statistics, and more to provide a comprehensive overview of perspectives. EBSCO articles (E) are available only to NAR members and require a password.

CARES Act (COVID-19 Stimulus) and Student Loans

Debt Forgiveness: Escape Your Student Loans (Investopedia, Feb. 1, 2022)

Between March 13, 2020, and May 1, 2022, no interest will accrue, and you don't need to make any payments. No late fees will apply if you stop paying during this period. You'll know you have this benefit if you see a 0% interest rate when you log in to your student loan account. On March 30, 2021, the Department of Education extended this benefit to defaulted privately held loans under the Federal Family Education Loan (FFEL) Program.

AARP Answers: Student Loans and the Coronavirus (AARP, Dec. 22, 2021)

If you want to continue making payments, those payments will be counted toward the principal of your loan, reducing your overall interest payments and ultimately paying down the loan faster.

If you're in default on your federal student loans, your wages, tax refund, and Social Security benefits including disability benefits won't be garnished during the forbearance period. In addition, your loans won't accrue interest during the forbearance period. Once again, private loans are not covered by the CARES Act.

COVID-19 Emergency Relief and Federal Student Aid (Federal Student Aid/US Dept. of Education)

On Dec. 22, 2021, the U.S. Department of Education (ED) extended the student loan payment pause through May 1, 2022.

The pause includes the following relief measures for eligible loans:

  • a suspension of loan payments
  • a 0% interest rate
  • stopped collections on defaulted loans

Student Loan Debt’s Impact on Home Ownership

Can You Get a Mortgage with Student Loans? (Nerdwallet, Feb. 15, 2022)

With stable income, timely bill pay and emergency fund and retirement savings, you may be in a good position to buy a house despite your student loans. Included are some options to make a stronger application.

Student-Loan Burdens Upend the American Homeownership Dream (Bloomberg Wealth, Jan. 5, 2022)

Overall, the rate of homeownership among student borrowers age 18 to 35 has dropped 24% in the decade through 2019, the report shows. People living in Black and Asian communities saw the biggest declines -- even as they started with the lowest rates back in 2009.

Homeownership & the Student Debt Crisis (Eduard Nilaj, Dec. 18, 2021)

The Impact of Student Loan Debt (National Association of REALTORS®, Sep. 2021)

  • While the plurality say student loan debt has not impacted any of the tested employment decisions (42%), others say debt has kept them in disliked or uninteresting jobs, forced them to take second jobs, or take a job outside their preferred field.
  • Over one quarter of student loan debt holders say their debt has impacted their decision or their ability to purchase a home (29%), take a vacation (35%), or purchase a car (31%).
  • Approximately half of student loan debt holders say their debt has impacted their life choices. One third say it has impacted their ability to continue their education (33%) while 14% say it has impacted their decision to start a family.

Heavy Student Loan Debt Forces Many Millennials to Delay Buying Homes (NPR, Feb. 1, 2019) 

“Homeownership rates for people ages 24 to 32 dropped nearly 9 percentage points between 2005 and 2014 — effectively driving down homeownership rates overall. In January, the Fed estimated 20 percent of that decline is attributable to student loan debt”

Homeownership among Young Americans: A Look at Student Loan Debt and Behavioral Factors (The Journal of Consumer Affairs, March 1, 2018) E

From Abstract: “Three key findings arise from the research. First, life cycle and demographic characteristics, such as marital status, education, and income, continue to be strong predictors of homeownership. Married households with a college degree and children are among the most likely to own a home. Second, young adults with student loan debt are no more or less likely to own a home than someone without debt after controlling for a number of factors; however, students who have already paid off their loans are more likely to own a home. Finally, respondents who express a willingness to take risks in finances are more likely to own a home while those who are more conscientious are less likely to own a home.”

eBooks & Other Resources

eBooks

Generation Debt: How Our Future Was Sold Out for Student Loans, Bad Jobs, NoBenefits, and Tax Cuts for Rich Geezers—And How to Fight Back (eBook)

The Impoverishment of the American College Student (eBook)

Sold My Soul for a Student Loan (eBook)

Quit Like a Millionaire: No Gimmicks, Luck, or Trust Fund Required (eBook)

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