Paying off student loans eats up the time buyers could be saving for a home
Prospective first-time homebuyer can pony up for a down payment faster when cleared from student loan debt, according to a Redfin analysis of student loan and home price data.
The analysis looked at potential first-time homebuyers ages 22-44 who earned the national average salary of $65,879 and had an average $17,938 of student debt.
Sen. Elizabeth Warren (D-Mass.) recently proposed a plan to forgive student loan debts, targeting to wipe away up to $50,000 in student debt and shortening the time it would take to save for a down payment to nine years and four months instead of twelve years and three months.
Under Warren’s plan, the median 24 to 44-year-old homebuyer in Detroit – where an average home sells for $130,000 – could save for a down payment in four years and two months years, which is the shortest average time in the US.
Metro areas with the highest ratios of student debt to income could experience the largest decrease in the time it takes to save for a down payment, according to Redfin. The metros in the South where student-debt burdened homebuyers will benefit the most include Memphis (four years and three months faster), Birmingham (four years faster), and New Orleans (three years and nine months faster).
"The idea of taking on a mortgage when you're still paying off tens of thousands of dollars in student loans is a non-starter for many people," said Redfin Chief Economist Daryl Fairweather. "If student debt were eliminated, college grads would be able to start building wealth through homeownership, laying down roots and contributing to their communities years earlier in their lives. An influx of young, educated homeowners could have positive impacts on neighborhoods and society at large.”
