Student Loan Debt Slowing Real Estate Market

The headline on a recent article I read was “ May Not Be To Blame for Housing Woes”. Seems an official from the U.S. Treasury Department pointed out it was the because of the higher education wealth building potential of these students it was not a problem to be burdened with college debt and that was not stopping them from buying houses. Her additional “logic” was “unlike many other forms of credit like credit cards, student loans fund an investment, rather than consumption”. With “logic” like that it is no wonder our government is in the mess it is in.

She went on to compare numbers from 2007 and 2012 and came to the conclusion that the 2012 borrower pays $800 more per year now than in 2007. That equates to $66.67 less per month for the mortgage payment. Take into consideration that the same $66.67 will equal $12,320 in lost borrowing potential.

The numbers above reflect only the increase in student loan payments since 2007. Add to that an average student loan amount of $28,400 which equals $151.48 in monies lost per month that are available for a mortgage payment. Adding these two figures up we arrive at $218.15 less a month to pay the mortgage with. Using a cost factor of $5.41 per thousand dollars borrowed you have $40,000 less in buying power in 2012 vs. 2007. Add to that the huge increase of college attendees from 2007 to 2012 and you begin to see the problem, and we haven’t even touched upon the huge default rate on and how they affect a borrower’s credit rating, and consequently their ability to borrow and purchase a home.

I guess if you work for the government you can put the spin on anything to support your point of view.

The bottom line is that college debt is crippling our children, and it is negatively affecting many areas of our economy including the home building industry.

The governments “logic” doesn’t stand up to the facts.


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