Release date: 10/22/2014
Americans say student loans are key obstacle in purchasing homes: new survey from NeighborWorks America
– Nearly one out of four Americans knows someone who has delayed buying a home because of student loan debt, according to findings from the second annual America at Home survey commissioned by NeighborWorks America
, a national nonprofit community development corporation based in Washington, DC.
While the survey
shows 60 percent of adults say that owning a home is either the “most important” or a “very important” part of the “American Dream,” the burden of student loan debt and today’s overly tight lending environment appears to be working against many potential homebuyers.
Though it is not surprising those with student loans are wary of increasing debt levels by purchasing a home, it is important to note the powerful weight those with student loan debt express on their ability to be a potential buyer.
Additional key findings from the survey:
Of those who have student loan debt, 49 percent say their debt is at least somewhat of an obstacle to buying a home. When given a list of potential obstacles to home buying, "student loan debt" is the single largest obstacle among those who have debt (17 percent), over "lack of a down payment" (14 percent), the ability to "afford a preferred neighborhood” (13 percent) "lack of job security" (11 percent).
Twenty percent of those with student loan debt are more likely to say their opinion of homeownership has changed for the worse over the past five years. Furthermore, these participants are 10 percentage points less confident they can find “a mortgage that is right for them.”
Student loan debt disproportionately affects blacks and Hispanics. When combined, African Americans and Hispanics make up approximately 20 percent of the population, but represent 29 percent of those with student loans.
Student loan debt also affects the majority of women. Women make up 58 percent of those with student loans. This may be a reflection of the rise of women in institutions of higher education (per the Pew Research Center by 2012, women enrolled in college immediately after high school had increased to 71 percent).
“Earning a postsecondary degree is increasingly critical in the United States, but student debt is preventing some Americans from purchasing a home and fully fulfilling this ‘American Dream’ aspiration,” said Chuck Wehrwein, acting CEO of NeighborWorks America. “If we don’t mitigate the effect student loan burden is having and will have for years to come on homeownership, the country will lose a significant amount of economic activity and hundreds of thousands of people will be unable to benefit from the stability and financial value that homeownership has been proven to offer.”
The need for homebuyer counseling
For those with student loans whose debt-to-income ratio pushes them outside the traditional mortgage approval box, NeighborWorks believes that lenders should consider the role housing counseling and education
can make toward reducing risk for these borrowers. According to the survey, 25 percent of consumers with student debt say they would go to a housing counselor for information, compared to 13 percent of consumers without debt.
“The earnings potential for college graduates increases over time,” explained Wehrwein. “By prudently investing in these graduates and counseling those who aspire to homeownership, more Americans can put down stronger community roots and become a larger part of our economy.”
Widmeyer Communications, a Finn Partners company, conducted the national representative survey among 1,000 U.S. adults using a random digit dial sample. The survey has a margin of error of +/- 3.1 percentage points at a 95 percent confidence level.
For a copy of the full findings, please go to NeighborWorks.org/HousingSurvey
About NeighborWorks America
For more than 35 years, NeighborWorks America has created opportunities for people to improve their lives and strengthen their communities by providing access to homeownership and to safe and affordable rental housing. In the last five years, NeighborWorks organizations have generated more than $22.5 billion in reinvestment in these communities. NeighborWorks America is the nation’s leading trainer of community development and affordable housing professionals.