The Morning Economic Report
5:30 am
Tue July 8, 2014

Student Debt and the Housing Market - 7/8/14

Yesterday, we focused on data indicating that America’s student debt crisis is overblown.  Today, we look at trends that suggest the opposite.  Nowhere does the student debt issue in American appear to have as much impact as in the housing market.  Homeownership among Americans under age 35 hit its lowest level on record earlier this year just as indebtedness among college graduates attained a new high according to the Wall Street Journal.  College students who took out loans will graduate this year with an average of $33,000 in student debt, up 32 percent since 2007 in real terms.  Debt among graduate students is also up sharply. 

The growing number of borrowers and indebtedness has pushed overall student debt to $1.2 trillion, almost double 2007, much of it at relatively high interest rates.  It should come as no surprise then that young people are having a difficult time coming up with 20 percent down-payments and lining up mortgages.  The homeownership rate among those age 35 has fallen to 36 percent, down from a high approaching 44 percent in 2004.  Despite these data, there are economists who believe that rising student debt is not really the culprit, and that factors such as tighter lending standards and the prevalence of lower wage job creation are more important.