College Guide

Blog

August 17, 2012 11:00 AM 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.

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer

Comments

  • Bobby Goren on August 18, 2012 3:41 PM:

    Come on. You mean to say that everybody doesn't have AMC stock with which to finance their education? I guess they picked the wrong parents.

  • Milan Moravec on August 18, 2012 4:21 PM:

    Provost Chancellor at UC Berkeley mortgage students future. Public university major’s in harvesting money, education taxes. University of California Berkeley is nationally ranked #1 public university total academic cost (resident) as a result of the Provost Chancellor goal to ‘charge Californians higher tuition’. UC Berkeley tuition is rising faster than costs at other universities. Cal ranked # 2 in faculty earning potential. Believe it: Harvard College less costly.

    University of California negates the promise of equality of opportunity: university access, affordability is farther and farther out of reach. Self-absorbed Chancellor Birgeneau, Provost Breslauer are outspoken for public Cal. ‘charging Californians much higher’ tuition. Chancellor, Provost leave an indelible legacy on access, affordability.

    Birgeneau ($450,000) Breslauer ($306,000) like to blame the politicians, since they stopped giving them their demanded funding. The ‘charge Californians higher tuition’ skyrocketed fees by an average 14% per year from 2006 to 2011-12 academic years. If Chancellor Provost had allowed fees to rise at the same rate of inflation over the past 10 years they would still be in reach of most middle income students. Breslauer Bergeneau increase disparities in higher education and defeat the promise of equality of opportunity. An unacceptable legacy.

    Additional state tax funding should sunset. The sluggish economy and 10% unemployment devistate family education savings. Simply asking for more taxes to fund self-absorbed Cal.senior leadership, old inefficient higher education practices, excessive faculty staff compensation and burdensome bonuses, is not the answer.

    UC Berkeley is to maximize access to the widest number of Californians at a reasonable cost. Birgeneau’s Breslauer’s ‘charge Californians higher’ tuition’ denies middle income families the transformative value of Cal.

    The California dream: keep it alive and well. Fire (honorably retire) Provost George W Breslauer. Birgeneau resigned.

    Opinions? UC Board of Regents marsha.kelman@ucop.edu Calif. State Senators, Assembly members.

  • maggie on August 19, 2012 5:05 PM:

    And these would be the same people I'm counting on to purchase my house when it comes time to sell it.

  • ceilidth on August 20, 2012 7:54 AM:

    The median amount of debt for a student loan is around $20,000. That's about the same as the price for a low to medium priced new car. How often do we say, "If you buy a new car, you will never be able to buy a house?" I understand tremendous debt may be the unfortunate norm for things like medical school; it's not for undergrad degrees. The sad stories about students who graduate from undergrad programs with $100,000 in debt are the stories of people who did not use much in the way of judgement. I do think that tuition has gone way too high but loans are a two way street: there are the people selling loans beyond what sane people should be borrowing and people agreeing to the loan who should be showing some self control.

  • Jerseyan on September 05, 2012 10:24 AM:

    The average student debt from undergraduate is $22,000. "Among students beginning their studies in 2003-04, about 19% of bachelor�s degree completers � and
    about 13% of students who last attended a four-year institution but did not complete a bachelor�s degree
    � accumulated more than $28,000 in student debt."

    If a graduate is un/underemployed he or she will have a difficult time paying off a $22,000 debtload, but that graduate would not be in a position to buy a house anyway. The reason young people are having trouble buying houses is therefore the recession, not student debt.