The Shackles of Student Loans

It’s been talked about for years at this point, and more so in the last few months as politicians wizen up to the financial struggle of the American Millenial: student loan debt is spiraling out of control. Law makers such as Elizabeth Warren are pushing agendas to allow borrowers with government student loan debt to refinance at a lower rate, saying that the US government should not be profiting off of the backs of our children, while some disagree that this is even happening.  Senator Warren speaks about student debt as a key issue regarding giving American children and adults a fighting chance to be able to build something with their lives. Right now, there are 1.2 trillion dollars in outstanding student debt weighing down 40 million Americans.  You can reduce your interest rate by refinancing on home loans, business loans, even car loans, but no way to do that on student loans.  Conservatives such as Mitch McConnell have lead the fight to squash that option and kill that bill in the legislative branch of the government.

Recently, news media in the housing industry has been focusing on the link between elevated amounts of student debt and the beleaguered housing recovery.  Many previous sources have drawn a tenuous link between the two born more out of  common sense than actual numbers, but now a financial research and consulting firm in the real estate market has come out with actual numbers, indicating that these elevated levels of student debt are on track to cost the housing industry $83 billion in 2014. Many recent articles break down the math in a way that fosters as much dismay as awareness, as the study only looked at people ages 20-40 when the over 40 crowd frequently has student debt as well.

It is important to keep in mind that the majority of determination of loan eligibility is based on factors such as debt-to-income ratio. When borrowers have a high amount of student loan debt and equally high payments, they are less likely to be able to qualify for higher mortgages and frequently for any mortgages at all.

While the housing recovery has made some recent strides despite this, the report itself is dismal for the possibility of a full and more stable recovery bringing us back to where we were in 2006, without the risk.

We’re not without hope, however.  Brena Swanson at Housing Wire reported this week that in the wake of these bleak findings, there’s at least one student loan lender who is trying to help fill this mortgage gap. She reports that Social Finance (SoFi), a company that announced an Initial Public Offering this week, is utilizing crowdfunding (the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet) to surpass $1 billion in loans.

Despite the humorous zing at the end of the article, Swanson elucidates SoFi’s goals as the ability to offer low down payment options, accessibility for first time homebuyers, easy pre-qualification and faster financing, all of which should be options being promoted by the government which holds a sizeable chunk of American student debt.

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