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Financial Jul 1, 2015

Student Loan Debt Impacting Home Ownership, Birth Rates

Sponsored Content provided by Patrick Stoy - Mortgage Consultant/Owner, Market Consulting Mortgage

With the expansion of student loan debt and tuition rates continuing to increase, it might be tempting to say that it’s preferable to not have a degree than it is to shoulder a significant amount of debt. After all, what is the point of graduating with a degree that doesn’t appear to have a direct connection to career advancement, finances or goals?

If finances are the only factor, then it is still advantageous to have a degree. Full-time workers with bachelor’s degrees earn 60 percent more than individuals who only have a high school diploma. Also, many employers require applicants to have a degree even though it isn’t actually relevant to the job responsibilities. In short, not having a degree can be a barrier.

Still, with 40 million people facing an average student loan debt of $29,000, it’s hard not to question the value of going to college. Yes, the debt is cause for concern and it will ultimately produce a drag on our economy, but what’s worse is that student loan debt is exerting a range of social consequences.

Borrowers facing student loan debt “are postponing marriages, childbearing and home purchases,” said Mitch Daniels, president of Purdue University and the former Republican governor of Indiana. Since lenders have to consider all debt obligations, including student loan debt, potential buyers are being forced to wait or lower their expectations.

The Census Bureau points out that only 34.6 percent of Americans under 35 owned a home in the first quarter of 2015, compared to 43.3 percent in 2005. Many blame student loan debt for preventing them from owning a home; they also blame student loan debt for making them avoid starting families and businesses, or embarking on careers in social work and health care.

According to the Centers for Disease Control, the birth rate among women between 20 and 29 is now at a record low. Student loan debt is a huge problem, but with the demand for college firmly rooted in our society, and no conceivable barrier in place to prevent higher learning institutions from continuing to raise their prices, there is no easy solution.

George W. Bush in 2007 tried to help alleviate the problem by establishing Income-Based Repayment Plans (IBRP), which limit the repayment of student loan debt to 15 percent of an individual’s discretionary income. President Obama is trying to add to that with his 2015 budget, by limiting the repayment to 10 percent of discretionary income. Under each program, debt is forgiven for public employees after 10 years, and 20 years for private sector employees.

Neither is a good solution since both add to the national debt and don’t restrain the cost of an education. The bottom line, however, is that any problem can be solved. People with student loan debt don’t have to be discouraged about buying a home; they just need to find a lender with a little creativity and a commitment to find the best possible loan.

For a free consultation about your buying power, contact me at the number below.

Patrick Stoy has 16 years of mortgage lending experience. Patrick is CEO of Wilmington-based Market Consulting Mortgage, which he started in 2005 with a mission to build lifelong customer relationships by providing real value. To learn more about Marketing Consulting Mortgage, visit www.macmtg.com. Patrick can be reached at [email protected] or 910-509-7105.

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