By submitted [email protected]
COLLEGE STATION – Student loan debt can consume 3.3 to 10.9 percent of the average income of a Texas college graduate, making it harder to get a mortgage or save for a down payment .
“On average, a household earning $50,000 may need just over two years to save the down payment on a $217,000 home,” says Texas Real Estate housing affordability expert Dr Clare Losey. Research Center (TRERC) at Texas A&M University. “However, that increases to six years if the household is supporting the average student loan payment.”
Losey said, “For many younger households, student loan debt is yet another on a growing list of hurdles facing first-time homebuyers. These include historically high home price appreciation, strong demand for homeownership amid a limited supply of homes for sale, tight mortgage credit availability and of the current rise in mortgage interest rates.
Being a credit risk to lenders can hinder home ownership. Student loan debt makes mortgage applicants more credit risky by increasing their debt-to-income ratio (total measure of household debt). This limits their ability to save and lowers their credit score if they don’t repay their student loan, said TRERC’s deputy research economist.
The Institute for College Access and Success reported that 52% of undergraduates from four-year universities in Texas graduated with student loan debt in 2019-20, with an average balance of $26,273. Interest rates on student loans vary widely depending on when the loan is first disbursed and whether it is a federal or private loan.
In a 2021 survey by the National Association of Realtors, 60% of non-homeowner millennials (ages 26-41) cited student loan debt as a barrier to buying a home. Two-fifths of millennial homeowners said student loan debt delayed their home purchase by at least three years.
Funded primarily by Texas real estate license fees, TRERC was created by the state legislature to meet the needs of many audiences, including the real estate industry, instructors, researchers, and the public.