Millennial Purchases and Student Loan Debt

    For quite some time now there has been the rumor floating around that Millennials are not buying into the housing market because they are loaded with student loan debt. Ignoring the fact that Millennials have recently become the lead purchasing power in the housing market, finally supplanting the Baby Boomers, the myth that Millennials aren’t buying this or that because of their debt has been proven false time and again. Millennials have come forth as the strongest purchasing power in many markets not the least of which is the housing market. So, how are the Millennials holding up in light of all of this student loan debt?

    Here are just a few facts that show the Millennials aren’t letting their student loan debt slow them down from making any purchases:

    1. Millennials have purchased more homes over the most recent 12 month period than any other generation as reported by the National Association of Realtors.
    2. The homeownership rate of people currently between the ages of 25-29 is 34.3%. That is higher than the 33.6% rate members of the previous generation (45-49) achieved when they were that age.
    3. 74% of young adults between the ages of 18-34, according to a recent survey, plan to buy a home in the next five years with 32% planning to do it within the next year.
    4. 58% of young-adult households have less than $10k in debt. An additional 18% have between $10k and $20k.
    5. 36% of households with people between the ages of 20 and 40 had education debt, up from 14% in 1989. This shows that more people are going to college.
    6. Taking financial aid into account, the average tuition at private (nonprofit) colleges has not increased any faster than overall inflation over the last decade.
    7. Since the incomes of college graduates have grown since the early 1990s, the share of income that a typical student debtor has to devote to loan payments is only marginally higher than it was in the early 90’s – and somewhat lower than it was in the late 90’s (3.5% in ’92, 4.3% in ’98, and 4% in 2010).
    8. The burden for the people with the most debt is significantly lower today than two decades ago. Someone at the 90th percentile of debt had to devote 15% of their income to repayment in 2010, down from 20% in 1992.

    The authors of the study Is a Student Loan Crisis on the Horizon at the Brookings Institution gave us all of those numbers and had this to say:

    “Despite the widely held belief that circumstances for borrowers with student loan debt are growing worse over time, our findings reveal no evidence in support of this narrative. In fact, the average growth in lifetime income among households with student loan debt easily exceeds the average growth in debt, suggesting that, all else equal, households with debt today are in a better financial position than households with debt were two decades ago. Furthermore, the incidence of burdensome monthly payments does not appear to have become more widespread over the last two decades.”

    If student debt is crippling the Millennials’ ability to make purchases across various markets, no one can find any evidence to support this. Millennials are stronger now as the economy recovers and they are looking to buy now.

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