MADISON, Wis. — A recent study from a home building industry consulting firm estimates student loan debt is costing the U.S. housing market $83 billion annually in lost home sales. One Wisconsin Institute Executive Director Scot Ross noted that the most recent data tracks with an earlier study from his organization that found student loan borrowers and their families were significantly more likely to rent versus own their home.
“Student loan borrowers have done the right thing – working hard to get their education or job training and taking on the personal responsibility of paying for it. But $1.2 trillion in student loan debt is standing between them and a fair shot at the middle class. And, as this study finds, it’s also costing our national housing industry at least $83 billion a year.”
As reported in the Los Angeles Times a study from a consulting firm associated with the housing industry estimates every $250 in monthly household student loan debt payments reduces that household’s home buying purchasing power by $44,000. This reduced buying power translates into the U.S. housing industry losing $83 billion in sales every year.
Earlier national research by One Wisconsin Institute found that the average length of repayment for all those reporting student loan debt was 21 years, ranging from 17 years for those with some college but no degree up to 23 year for debtors with graduate degrees.
The economic impact of the debt was rates of home ownership 36% lower among individuals still paying on student loans versus those who have already paid off a loan across all income levels. In addition, individuals who paid off their student loan were more likely to have purchased a new versus used vehicle in the last 10 years.
For those currently repaying a student loan, over 63% purchased a used vehicle instead of a new vehicle.
At the national level, common sense legislation has been introduced to help student loan borrowers by allowing student loans to be refinanced, just like you can a mortgage. Recent attempts to move the bill in the U.S. Senate have been blocked by Republicans. The GOP controlled U.S. House of Representatives has also refused to act on refinancing legislation.
In Wisconsin, legislation was introduced in the state legislature to enact common sense reforms including refinancing and a tax break for borrowers in their historic Higher Ed, Lower Debt Act. Despite having 54 co-sponsors, Gov. Scott Walker’s Republican allies killed the bill. Democratic gubernatorial candidate Mary Burke included these proposals in her comprehensive jobs and economic development blueprint for the state.
Ross concluded, “This latest study is yet another warning sign about the consequences of continuing to ignore the $1.2 trillion student loan debt crisis on not just borrowers but our entire economy. We need to get serious about real, common sense reforms to treat these hard working borrowers fairly before the crisis becomes a full-blown economic catastrophe.”