college debt truly keeping a generation of young adults
from buying homes?
been the popular storyline as people in their 20s have
shunned the housing market since the housing crash.
Economists seeking explanations for a change in
behavior, and worried about a long-term drag on the
economy, have theorized that the slowdown was due
largely to a record level of student loan debt in the
country ó about $1.3 trillion. The narrative:
Struggling recent college graduates canít buy homes
and will continue to be deterred from buying because
they are shackled with immense college loans.
Susan Dynarski, a University of Michigan economics
professor and fellow of the Brookings Institution, is
challenging that argument in a new paper for Brookings.
She says that a surprising number of respected
economists have adopted an alluring narrative of
millennials unable to buy homes even though itís one
built on flawed evidence that has been debunked by
research done for the Federal Reserve Board of Governors
more than a year ago.
real drain on home buying, she says, comes from people
who havenít gone to college, rather than those who
have graduated with debt.
people fresh out of college have not been avid
homebuyers in their 20s, she said data on home buying
shows that once people are in their 30s, they are buying
at rates similar to the past. And this is true, she
said, even if they have student debt.
has been frustrated that the old narrative wonít die.
The initial impetus for the narrative came from a New
York Federal Reserve study that linked record student
loan debt with the absence of homebuyers. It was
deficient because the researchers didnít examine who
had gone to college and who hadnít, she said. Now, the
Federal Reserve Board of Governors data goes further,
and she used that research in her own. She hopes, she
said, to shake the election year rhetoric about student
loans that is not based on anything tangible.
makes my head explode," she said.
real problem with student debt, she said, is not for
people who complete bachelorís degree college programs
and leave college with the $30,000 in debt thatís
average among those who borrow. Rather, she said,
defaults on student loans are high among another group:
students who attended community college or for-profit
colleges for a while and dropped out with debt.
the absence of home buying is much more prevalent among
people who never went to college, rather than those who
did and left with college loans, she says. Even in their
30s, the noncollege graduates are sitting out the
home-buying market in large numbers.
the time people are in their 30s, the homeownership rate
of college-educated people with loans, and those without
loans, "is statistically indistinguishable,"
she said. Student loans typically are paid off in 10
years, so by their 30s many graduates are free of the
striking gap in home buying," she emphasizes,
"is in the group of people who stopped their
education with high school."
students get college degrees their earnings are much
higher, so they can pay off college loans and buy homes
in their 30s, she said.
Federal Reserve Board study used for her research does
show that when students increase their loans by 10
percent for four years of college, there is a 1 to 2
percentage-point drop in homeownership during their
first five years after exiting school. Between 2005 and
2014, there was a 9 percentage-point drop in
homeownership among people ages 24 to 32.
Dynarski says a five-year impact is not a long-term
of worrying about college students coming out of college
with debt, we should be trying to get more people to go
to college because it pays off tremendously" and
allows people to buy homes, she said. Over a lifetime
the college graduate is going to make about $600,000 to
$1 million more than the high school graduate, she
added, noting even grads in lower-paying fields can
afford the typical college loan payments.