30 Sep Study Shows Student Debt Holding Back Household Formation

By John Zurick, President and CEO, American Student Assistance

Over the summer, the National Association of Realtors released the results of a new survey that shows the impact of student loans on borrowers’ housing situation.

The survey, which was completed by 3,230 student loan borrowers who have registered with American Student Assistance’s Salt education consumer literacy program and are current in their repayment, included borrowers who attended public and private four-year colleges, community colleges, graduate school and vocational school. Survey respondents ranged from recently-enrolled to out-of-college more than six years, with the majority (79 percent) having completed at least a two-year degree. Forty-three percent of those polled had between $10,001 and $40,000 in student debt, while 38 percent had $50,000 or more. The most common debt amount was $20,000 to $30,000. The study broke down respondents by age group, from younger millennials up to older baby boomers, and also by personal income.

The results show that striking out and forming a household of their own is difficult for student loan borrowers because of their student debt burden, even among those who are managing to repay their student loans on a timely schedule. For example, student debt postponed four in 10 borrowers from moving out of a family member’s household after graduating college. Seventy-one percent of non-homeowner respondents cited student debt as the factor delaying them from buying a home, with the average delay about five years. Meanwhile, among those respondents who already own their own home, 31 percent said the student debt impacted their ability to sell their existing home and move to another.

Regardless of the outright amount of student debt, more than half of non-homeowners in each generation reported that it’s postponing their ability to buy:

  • Seventy-eight percent of respondents said student debt prevented them from saving for a down payment;
  • Sixty-nine percent said they didn’t feel financially secure enough because of existing student debt to buy a home; and,
  • Sixty-three percent said they couldn’t qualify for a mortgage because of their debt-to-income ratio.


All of this underscores the fact that student debt isn’t just an education policy issue, but an economic one as well. And, it affects far more than just those individuals who took out the student loans. When millennials can’t afford to buy the existing homes of the gen Xers looking to move up, or the baby boomers looking to scale down, then the whole housing market stalls. It’s also more than just home buying – the Salt/NAR study showed that student debt impacts people’s ability to take a vacation (tourism industry), buy a car, purchase entertainment, clothes and daily necessities, and start a small business. Seventeen percent said it even affected their decision to own a pet.

So, what can be done to solve this problem? First and foremost, we cannot dissuade Americans from pursuing higher education. College remains a great investment and our nation desperately needs a college-educated workforce in the global economy of tomorrow. Wide-scale ignorance would be more costly to our nation’s future than student debt ever could be.

But while college is still worth it, it’s true that student loans make pursuing postsecondary education a riskier proposition than ever before. Looking to the future, policymakers need to do all they can to lower college costs and amounts borrowed, by increasing public investment in higher education, supporting college savings plans, supporting Pell grant funding, keeping federal loan interest rates low, and focusing on college completion efforts.

In the here and now, multiple sectors – from colleges to government to the private sector – can take important steps to arm education consumers with information so they can make smarter decisions about choosing a college that’s the right academic and financial fit. What types of loans to take and how much, and utilizing repayment strategies that allow borrowers to balance their education debt with other financial priorities, also are significant steps.

No individual should fail to realize the full potential of their formal education due to finances, so we all must find practical and immediate solution to financially empower today’s student loan borrowers. Let’s work toward a sea change in the way students and families approach paying for higher education, sparking them to become active participants in the financing of their education – to ask questions, conduct research, compare alternatives. In short, think and act like a consumer. Ultimately, student loan borrowers’ ability to make smart consumer decisions about education will lift their financial futures – and ours.