No Mortgage for You
by Daniel Luzer
Student loan debt was supposed to be the good kind of debt. It’s, you know, an “investment in your future.” Except it turns out student loans may soon prevent large swaths of the American population from getting mortgages to buy houses, an actual investment.
According to a report released by Young Invincibles, an advocacy group, earlier in the week:
As monthly student debt payments increase for college graduates, so does their struggle to qualify for a mortgage. Looking at a key factor in qualifying for a mortgage - the debt-to-income ratio - we find some disturbing results. Debtors who graduated in 2004 and start looking for a mortgage to purchase a home in the next year - the average age for home purchases is 30 - will face some difficult realities.
The “difficult realities” turn out to be somewhat average ones. According to the study, “the average single student debtor has a debt-to-income ratio of .49.” It turns out someone with average credit card payments, average student loan payments, and a median salary would have a debt-to-income ratio of nearly 50 percent, which is too high to qualify for a mortgage.
This isn’t merely unfortunate for individual buyers. As the report explains, “home purchases create jobs and spur economic growth.” If people can’t buy houses, that’s a huge drag on the economy from which it’s going to be really difficult to recover without dramatic policy changes.