SEATTLE, Sept. 18 (UPI) — Student loan debt is not stopping young professionals from homeownership, a new study by Zillow suggests, bucking the conventional wisdom that the debt is hindering millennials from becoming first-time home buyers.
The Zillow report found as long as a four-year degree or higher is completed, “the effect of student debt on their chances of owning a home is negligible.” Instead, there’s a 70 percent chance that graduates with a medical, law or doctoral degree will own a home, the study found.
The study, which draws on 2013 data of thousands of household since the 1960s, found that while student loans do negatively impact a borrower’s probability of owning a home, the impact is much smaller than previously thought.
“Certainly, it’s better to accumulate debt and finish your degree than it is to accumulate debt but have nothing to show for it in the end,” Zillow’s chief economist, Svenja Gudell, said. “In other words, if eventually owning a home is a priority for you, and you’re currently pursuing higher education: Don’t be a fool, stay in school.”
The new research comes as the nation struggles for answers about handling the $1.2 trillion in outstanding student debt and the growing difficulty some 40 million Americans are having to pay down loans. The general consensus is graduates with outstanding student loans aren’t buying homes because they don’t have enough money for down payments, encounter debt-to-income restraints when applying for loans or face credit problems if they miss payments or default.
Zillow, an online real estate database company, said its study proves there are holes in those scenarios. It found that graduates with a master’s degree have a 66 percent chance of homeownership, 61 percent with a bachelor’s degree and 56 percent with an associate’s degree. Just 30 percent of those with no degree own a home.
“Finishing with a bachelor’s degree or higher actually tends to insulate borrowers from being adversely affected by student loan debt when it comes time to buy,” Zillow said.
The Zillow study used information from the University of Michigan’s biannual Panel Study of Income Dynamics, looking at families and individuals age 22 to 40.
