Student loan debt has undoubtedly exacerbated housing affordability for first-time homebuyers, who struggle to save while managing payments. Recent research by FICO shows just how much of an impact that debt is having on on-the-fence buyers, and housing. Just 17 percent of those with student loans have mortgages, in contrast to the 33 percent of those who have paid off their loans, according to the research.
“Our data show that people with active student loans are far less likely to have mortgages than consumers without student loans,” says Ethan Dornhelm, who leads the FICO® Score analytics team. “It may be that student loans hinder the capacity and/or willingness of people to buy houses and take out credit cards, or it may be that people unable to pay off their student debt may be less likely to be able to afford mortgages and new credit.”
Total student loan debt, per FICO, is over $1.3 trillion, and accumulating by $2,700 per second. In the past 10 years, student loan debt has, on average, grown from $5,363 to $12,951. The percentage of those aged 25-34—prime home-buying years—who have $50,000 or more in student loan debt has doubled from 2005 to 2015, with mortgage debt doubling back over the same time.
The presence of a student loan debt obligation is having an impact on creditworthiness, as well. The average FICO score for those aged 30-34 without student loan debt is 697; the average FICO score for those with is 653. A lower credit score, as is the case for many would-be homeowners, could be contributing to the overall lack of mortgage debt.
“This score disparity is yet another reflection of the drag that student loans are placing on consumer credit activity years after most people are out of school,” says Dornhelm.
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