The topic of how the increase in student loans may result in a decrease in mortgage loans has been trending lately, and experts are weighing in. Realtor.com says that student loans are not necessarily an obstacle to homeownership, but that one’s payments will be taken into consideration when applying for a mortgage. They stress lenders’ focus on debt-to-income ratio, and while debt is certainly a detraction for future loans, income is often times directly increased with the result of student loans: a college degree.
A recent report from the Vanguard Group states that there is no bubble to burst; US student debt is not housing. While the Vanguard Group reports student loan debt now exceeding $1 trillion, doubling since the recession, it also claims that student debt growth is too small to repeat a debt crisis like that of 2007-2009. Figures presented place outstanding student debt at only 7% of the U.S. GDP whereas mortgage debt peaked in 2007 at 62% of US GDP.
While such news is certainly encouraging, the real question is whether student loan debt leads to purchasing a home. The same report states that “although financing a bachelor’s degree with student debt decreases the likelihood of a typical 30 year old college graduate purchasing a home by –1.7%, obtaining that degree also increases the likelihood of purchasing a home by 10.8%, relative to not attending college at all.”