We’ve been hearing the dire warning for years: The $1.3 trillion Americans collectively owe in student loan debt is dragging down the housing market. Millions of young people can’t become homeowners because they’re stuck paying off tens — if not hundreds — of thousands of dollars in college debt.
Well, it turns out borrowing to pay for college won’t necessarily doom you to a lifetime of renting. Research from the Board of Governors of the Federal Reserve System suggests having student loans isn’t the barrier to homeownership many thought it was. Rather, having a college education makes it more likely you’ll buy a home than someone who didn’t go to college, even if you did take out student loans, as Susan Dynarkski, an economist with the Brookings Institution, explained in a blog post.
In 2014, Harvard economist Larry Summers singled out student loan debt as a factor keeping first-time buyers out of the housing market. The same year, a study by John Burns Consulting concluded 414,000 fewer homes were sold in 2014 because heavily indebted borrowers couldn’t afford to buy.
Most notably, a 2013 Federal Reserve Bank of New York analysis found rates of homeownership among 30-year-olds with student debt fell more dramatically after the recession than those of their peers without debt. Though people with student loans had historically been more likely to own homes than those without debt, “by 2012, the homeownership rate for student debtors was almost two percentage points lower than that of non-student debtors,” the researchers noted.