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.”