Student Loan Debt Keeping Millennials from Homeownership
Reportedly, student loan debt has tripled in the last 10 years, with balances concentrated among the population under age 39. Freddie Mac's chief economist, Sean Becketti, notes that "recent data has confirmed that not all student is created equal. Students who attended schools with less-certain educational benefits have not fared well. Borrowers who did not complete their studies have fared worst of all... Moreover, a change just this month in Federal Housing Administration policy will make it more difficult for some student loan borrowers to qualify for a mortgage."
"The low homeownership rate among millennials is still something of a puzzle," he admits. "It cannot be explained solely by the increase in student loan debt. However, student debt plays a role-- higher balances are associated with a lower probability of homeownership at every level of college and graduate education."
Student loan borrowers have been categorized in three ways: successful investors, disappointed earners, and at-risk borrowers. The subsect of "at-risk borrowers" is a particular area of focus for Freddie Mac, despite marked histories of poor repayment impacting this group's creditworthiness efforts are being made to support lending to such buyer candidates. Freddie Mac's Home Possible Advantage (SM) program exists to assist the "disappointed earners," and even some of the "successful investors," with an option to pay as little as 3% down on purchasing their first home.