The WSJ recently published an article highlighting a Federal Reserve research study suggesting that student loans have negatively impacted younger Americans in their ability to buy homes.  They estimate that nearly 400,000 young Americans were impacted.  Was a research paper really necessary to understand that $1.5 trillion in student loan debt, which is now greater than revolving credit card and auto debt, would impact home ownership?

The article indicated that home ownership had fallen among 24-32 year-olds by 9% during the 2005-2014 period. They estimated that 2% of the decline was directly related to the growing student loan debt.  I am personally skeptical that ONLY 2% of the 9% was related to this burden.  New Jersey has more 18-34 year-olds living with their parents or another relative than any other U.S. state. I suspect that Mom’s cooking isn’t the only reason that this is occurring.

Student loan debt is not just negatively impacting one’s ability to buy a home, but it is also delaying family unit creation and funding for one’s retirement program, which is particularly troubling given that this burden through defined contribution plans falls mainly on the individual.

“Skylar Olsen, director of economic research and outreach at Zillow, said student loans are combining with high rents and rising home prices to make it difficult for younger households to save for down payments. “It’s a one-two punch,” she said. (WSJ)”

According to the article, the average 22-27-year-old with a Bachelors degree earned about $42,000/year in 2017.  Despite significantly greater wages than those with just a high school degree, is $42,000 really enough to manage student loan debt, a mortgage, and have disposable income for anything else? Especially if one lives in a high tax state. Since the study also suggests that many of these younger Americans are flocking to cities because of jobs and the availability of rental properties, I would suggest that most live in tax-challenged environments.