The Association between Student Loan Debt and Homeownership among US Young Adults

Lead investigators: Silda Nikaj and Joshua Miller (HUD)

The U.S. Census Bureau quarterly survey of housing vacancy and homeownership shows that for adults under age 35 the homeownership rate dropped from a record high 43.6 percent in the second quarter of 2004 to its current record low of 34.6 percent in the first quarter of 2015. During the same period, student loan debt soared to an average of $29,400 per borrower for the class of 2012, growing at an annual rate of 6 percent from 2007 to 2012. Higher levels of student loan debt have the potential to delay transition into homeownership, because student loan payments impact debt-to-income ratios and crowd out savings toward a down payment for a home. Using the Educational Longitudinal Study of 2002 (ELS 2002), we estimate the associative relationship between student loan debt and tenure choice among young adults. We find that 26 year olds in 2012 with student loan debt are 4 to 5 percent less likely to own a home than those without student loan debt. The results are consistent, albeit smaller in magnitude, to those of a complementary longitudinal study of 26 year olds in 2000 (Cooper & Wang, 2014).