While college-educated workers usually pull down higher incomes than those who do not obtain a post-secondary degree, a new report indicates that many new college graduates will be unable to obtain a mortgage because their student loans will push their debt-to-income ratio too high.
Student loan debt soared to $1 trillion this year. The report from Young Invincibles, “Denied? The Impact of Student Debt on the Ability to Buy a Home,” found that today’s college graduates are actually worse off than previous generations, financially speaking. The authors estimate the average 30-year-old college graduate looking to purchase a home would need to spend about half of his or her monthly income on mortgage, student loan, credit card, and car payments, leaving them ineligible for many home loans, including those guaranteed by the Federal Housing Administration.
“As education debt grows, it pushes more borrowers out of the housing market, potentially adding another drag to an economy only just emerging from the Great Recession,” said Rory O’Sullivan, policy director at Young Invincibles.
The report does not factor in credit scores or down payments, which also greatly affect mortgage attainability. Please provide your thoughts.
Source: “Student Debt Pushes Homes Out of Reach,” Pittsburgh Post-Gazette (08/21/12)