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Research Finds that Student Loans Hinder Millennials From Saving for a Home

The conflicts of student loan debt surpass just actual repayment. Trulia research titled "The Debt of Wrath: Do Student Loans Affect Saving for a Home?" recently found that college degrees hinder young millennials from saving up for a 20 percent down payment on a home due to student loan repayment, but in the most expensive markets, only those with a college degree will be capable of saving up enough for a home in their lifetime.

“A college degree undeniably comes with perks, including better long-term job prospects and higher lifetime earnings,” said Ralph McLaughlin, a housing economist at Trulia. “But many millennials who get a college degree must pay back student loans, making it more difficult to save for a down payment in the short run.”

According to Trulia, saving for a down payment is one of the biggest hardships on the road to homeownership. A recent Trulia survey determined that 30 percent of 25-30 year olds in the U.S. said that they are currently trying to save for a down payment in the next two years.

The next issue that Trulia highlights is the necessity of a college degree when looking to purchase a home and saving for a down payment. Whether a degree is secured or not depends on where the consumer wants to purchase a home. Approximately 30 percent of young millennial households have a 4-year college degree and 70 percent do not. The average college-educated American has about $26,000 in student loan debt, which translates into an average monthly payment of about $280 per month on a 10-year repayment plan.

Trulia identified housing markets in the U.S. where any millennial could make enough money to save for a down payment in a reasonable time, regardless of whether they hold a college degree. First on this list is Detroit, Michigan, where a 25-30 year old could save for a down payment in 4.1 years with a college degree and 5.3 years without one. Camden, New Jersey came in second with down payment savings occurring in 5.3 years for millennials with a degree and 5.9 years with no degree. Finishing out the top three, Dayton, Ohio allows millennials to save for a down payment in 5.7 years with a degree versus 5.3 years without one.

In some markets, Trulia found that millennials with no college degree can actually save toward a down payment on a home faster than college-educated households. In Las Vegas, Nevada, potential young homeowners can save for down payment in 8.7 years with no degree, compared to 10.2 years with a degree. In Columbia, South Carolina, a millennial can save for a down payment in 8.1 years with no degree, and 7.4 years in El Paso, Texas.

“The boost in income that you get for having a college degree in these metros is small,” McLaughlin said. “Second, households with college degrees typically have student loan payments, which hinder their ability to save for a down payment.”

Click here to view Trulia's full report. 

About Author: Xhevrije West

Xhevrije West is a writer and editor based in Dallas, Texas. She has worked for a number of publications including The Syracuse New Times, Dallas Flow Magazine, and Bellwethr Magazine. She completed her Bachelors at Alcorn State University and went on to complete her Masters at Syracuse University.
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