US Student Loans vs Home Ownership
Graduates in the United States who have a mountain of student-loan debt can relax, as it should not affect their chances of owning a home.
Benjamin Franklin, one of the founding fathers of the US, once stated: “An investment in knowledge pays the best interest.” The words may still apply today, but unfortunately, as any parent who has a child attending a tertiary educational institution will tell you, there is a downside: investing in knowledge costs a tremendous amount of money. Few parents can shoulder the burden alone, and it would be safe to say that most students in the developed world have student loans to repay when they graduate.
It is a common misconception that American students are delaying the decision to buy a home because they are being weighed down by student loans. The average student in the US has accrued between $39,000 and $42,000 (about R560,000 and R603,000 at the time of writing) of debt by the time they finish their studies.
This, however, doesn’t appear to affect their ability to secure a bond, although much depends on the type of degree they’ve earned. According to an article on PropertyWire, the chance of a married couple with no student debt owning a home is about 69.8% provided at least one of them has a bachelor’s degree. If the same couple has $30,000 in student debt, their homeownership chances drop slightly, to 67.7%. Interestingly, research conducted by Zillow.com, an online real estate database company, has found that those who racked up student debt but did not graduate are the least likely to own their own homes − a mere 40%.
“The income advantage of getting a degree pays off in terms of being able to buy a home in the long run. Student debt isn’t the evildoer it’s made out to be, at least not when it comes to home ownership,” said Zillow’s chief economist Dr Svenja Gudell.
PROPERTY IN NUMBERS
- £1,560 Average monthly rental for a London property
- $39,000 TO $42,000 Average American student’s debt at the end of his or her studies