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The Impact of Student Debt on Housing

J.P. Morgan Chase reports that student debt has doubled in the past 10 years to $1.5 trillion in 2018—second only to mortgage debt—and impacts 45 million borrowers. 

“Although the financial returns from a higher education degree over a lifetime typically exceed the costs, roughly 22% of student loan borrowers are in default,” the report said. “As a result, some have framed the ‘student loan crisis’ as a crisis of student loan repayment rather than student loan debt.” 

Among the findings by J.P. Morgan Chase was that the average family pays a median of $179 per month in loans of take-home income in months with positive payments. Nearly a quarter of families spend more than 11% of their income on student loans. 

While noting younger borrowers, those between 18 and 24-years-old, collectively have the most student debt, it is those within lower-income families that have the most trouble making consistent payments. 

The study revealed that 44% of homebuyers who earn less than $50,000 annually make positive payments to their loan. That number increases to 52% for those earning between $50,000-$1000, and 63% for borrowers who make more than $100,000.

Also, families with multiple loans pay their student loan bill more inconsistently than they do their mortgage or auto loan. The report states that families who pay their loans between 90-100% of the time, make payments on their student loan debt 54% of the time, compared to 64% for their mortgage. 

Those borrowers also pay their auto loan 62% of the time, and just 56% pay their student loan bill consistently. 

Reports show that student loan debt has already been impacting the housing market, including a report out of Dallas and WFAA, which delves into how growing debt is making it harder for borrowers to buy a home. 

“From a practical perspective, somebody coming out of school with heavy student loan debt may simply not qualify for a conventional loan,” said Rick Sharga, founder, President and CEO of CJ Patrick Co., a California-based real estate and financial services consulting firm.

Sharga added that millennials came into the market after the Great Recession, many of which had record levels of student-loan debt, and into a market with no jobs.

“The notion of them being able to pay back that student loan debt in any reasonable period of time was pretty much a fantasy,” Shagra said. 

About Author: Mike Albanese

A graduate of the University of Alabama, Mike Albanese has worked for news publications since 2011 in Texas and Colorado. He has built a portfolio of more than 1,000 articles, covering city government, police and crime, business, sports, and is experienced in crafting engaging features and enterprise pieces. He spent time as the sports editor for the "Pilot Point Post-Signal," and has covered the DFW Metroplex for several years. He has also assisted with sports coverage and editing duties with the "Dallas Morning News" and "Denton Record-Chronicle" over the past several years.
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