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The Student Loan Crisis & Arizona Real Estate

by Dalton Herring on April 23, 2015

A crippling financial burden for millions of Americans, the current student loan crisis threatens the entire U.S. economy. As the housing market follows suit, real estate in Arizona runs the risk of taking a serious hit, with more and more potential first-time buyers finding their funds wrapped up paying off the soaring price of higher education.

Startling Statistics
It’s the American Dream: Go to college, buy a home, raise a family. Unfortunately, a confluence of factors are aligning into a perfect storm of disappointment for today’s graduates, summarized in these alarming numbers from the National Association of Realtors:
• 49% of Americans cite student debt as a major home ownership obstacle.
• First-time homebuyers fell from 50% of sales in 2010, to 27% in 2014.
• Student loan debt rose from $241 billion in 2003, to $1.1 trillion in 2014.
• Nearly 6 million households owe $250+ per month to student loans.
• Monthly payments of $250 lower your purchasing power by $44,000. *
* John Burns Consulting

To Own a Home, or Go to College?
This is a question many Americans face today. Even though it shouldn’t be the case, the Federal Reserve Bank of New York recently revealed that Millennials (ages 34 and younger) who choose to forgo college are more likely to own a home than their higher educated peers. While this may be the national trend, there are ways prospective Arizona homebuyers can turn things around.

There is Hope!
Despite the mounting crisis, hope is out there. In fact, Millennials bought more homes than any other age group in 2013 and 2014. Student debt might delay saving for a down payment, but there are a few things you can do to increase your odds of getting a mortgage when the time is right. First and foremost, apply for an Income-Base Repayment (IBR) or Pay As You Earn (PAYE) plan. These new loans are forgiven after 10-25 years, with rates that adjust with your income, making credit-damaging delinquency less likely. Prospective buyers are also advised to:
• Visit IBRinfo.org for a helpful guide about federal loans.
• Avoid volatile private student loans.
• NEVER default on payments.


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