New studies challenge CFPB claims that student loan debt is discouraging homeownership


The charge that student loan debt is causing young adults to postpone home ownership has come from various quarters, including the CFPB. However, two new studies, one the subject of an article released earlier this year and the other the subject of a Brookings Institution report released this week, suggest those charges are overblown.

The article, entitled “Is Student Loan Debt Discouraging Home Buying Among Young Adults?,” was written by Jason Houle from Dartmouth College and Lawrence Berger from the University of Wisconsin. Based on their review of the relevant data, the authors state that while finding “a very modest association between debt and home ownership, we find little evidence that student loan debt is a ‘major culprit’ of declining home ownership among young adults. Instead, it is likely that declining home ownership among young adults—which predates the recent rise in student loan debt—is more responsive to structural changes in the economy and changes in the transition to adulthood.”

The Brookings report, entitled “Is a Student Loan Crisis on the Horizon?,” was issued by Brookings’ Brown Center on Education Policy. The authors, Beth Akers and Matthew Chingos, examined more than 20 years of data from the Survey of Consumer Finances administered by the Federal Reserve Board to track how the education debt levels and incomes of young households have evolved between 1989 and 2010. Their key findings included the following:

  • Roughly one-quarter of the increase in student debt since 1989 can be directly attributed to Americans obtaining more education, especially graduate degrees. While the average debt levels of borrowers with a graduate degree more than quadrupled ( from just under $10,000 to more than $40,000), the average debt levels of borrowers with only a bachelor’s degree increased by a smaller margin ( from $6,000 to $16,000).
  • Increases in the average lifetime incomes of college-educated Americans have more than kept pace with increases in debt loads.
  • The monthly payment of student loan borrowers has stayed about the same or even lessened over the past two decades.
  • Typical student loan borrowers are not worse off now than they were a generation ago, with the data showing no increase, and if anything, a decline, in the percentage of borrowers with high payment-to-income ratios.

The Brookings report finds that “the new evidence suggests that broad-based policies aimed at all student borrowers, either past or current, are likely to be unnecessary and wasteful given the lack of evidence of widespread financial hardship.” The authors suggest that “policy efforts should focus on refining safety nets that mitigate risk without creating perverse incentives.”


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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