Home Buying Not Tied to Student Debt

A popular assertion these days is that young adults paying off student loans can’t afford to buy a house.

This might be the financial equivalent of Chicken Little.

Contrary to concerns that the sky is falling – or, rather, the first-time homebuyer market is falling due to student debt – a new study finds very little evidence to support this view.

The researchers tracked the home-buying behavior of more than 5,000 college-going young adults for a full decade through the National Longitudinal Survey of Youth. They confined the analysis to people who attended college – graduates and non-graduates alike – in contrast to previous research that compared the behavior of all young adults and found that borrowing got in the way of homeownership.

The new study actually found they were slightly more likely than non-borrowers to purchase a house. But this could be due to the fact that the borrowers tended to be the type of people who persist and complete their degrees, attend more expensive schools, and possess other socioeconomic advantages. This comparison of borrowers and non-borrowers still didn’t settle the question of whether the probability of owning a home actually decreases as the level of student debt rises.

When the researchers further narrowed the analysis only to individuals who held student loans, they found no relationship between the amount of money borrowed and the probability of homeownership. “If you have $30,000 in debt you’re no less likely to buy a home than if you have $3,000 in debt,” said one of researchers, Jason Houle, an assistant professor of sociology at Dartmouth College.

The findings, Houle said, “cast doubt on this idea that student loan debt is dragging down the housing market.”