According to the National Association of Realtors, the percentage of first-time buyers in the housing market today is 29 percent. For many students, substantial student loan debts prevent them from entering the real estate market to take advantage of the current historically low mortgage rates.
Students’ loan debts play a significant role in the current mortgage market. Specifically, student loans are reported to credit reporting agencies and are a factor in qualifying for a mortgage loan. Students with a large amount of debt will likely not qualify for a mortgage.
According to Bernard Weinstein, Ph.D. and Adjunct Professor of Business Economics at Southern Methodist University, the total balance of outstanding student loans exceeds $1.1 trillion, an amount greater than all existing credit card debt. In addition, according to Dr. Weinstein, the average amount owed at graduation by students with a bachelor’s degree has jumped from $10,000 to $40,000, while the average balance for graduate students has increased from $18,000 to $56,000. Also, delinquency rates on students’ loans have doubled to 12 percent over the past eight years while the rates have fallen on credit cards, mortgages, and auto loans.
According to Bennie Waller, Ph.D. and Professor of Finance and Real Estate at Longwood University, students must realize the financial consequences of debt, which include student loans. All borrowed funds must be repaid. Dr. Waller states that students must recognize that the funds must be repaid when choosing to pursue an advanced degree.
Dr. Weinstein suggests that over the long term, more job creation and higher real incomes for younger workers offer the best hope for securing a mortgage and boosting home purchases.
Be sure to consult experienced legal counsel for questions and concerns.