Can Student Loan Forgiveness help Real Estate?


Can Student Loan Forgiveness help Real Estate?

Most home buyers today have no idea that there were homebuilders in 2017 offering to pay off up to $13,000 in student loans. That is how fast markets change!

While the mortgage application process is now simplified, it is still not that easy for everyone to purchase a home. This is especially an issue for those professionals who are still repaying student loans.

Millennials have seen a sharp increase in education debt, with students taking on loans to pursue higher education. This has made it harder for past students to save up for a down payment on their first home, making it less likely that they will be able to buy one until they lower their debt to income level. Would student loan forgiveness get millennials into homeownership sooner?

People start to pay off student loans and buy a home when they get married and have kids. This is the third phase of the life cycle for most millennials ages 30-35.

Being in the real estate industry, we have seen many highly educated and high-income earning home buyers with student loans well into their 50's and beyond. 

This argument is based on the fact that most millennials are starting to get married in their 30's which means getting rid of student loans is helping them reach their homeownership goals.

The idea that millennials are delaying marriage and homeownership because of student loans is a common misconception. Working in the real estate industry, I have seen many homebuyers with student loans well into their 50's. But are they willing to spend more on a home if they did not have student loans?

  • In 1989, 14% of American households with people between the ages of 20 and 40 had education debt. However, this number has gone up over the years; 36% of homes between 20 and 40 had education debt.
  • Fewer than half of young adult households owe less than $10,000 in debt, and an additional 18% have obligations between $10,000 and $20,000.


Mortgage Process


Debt to Income Ratio

The DTI ratio is a valuable metric that helps borrowers understand how much they can afford to spend. It also shows what the market price of property concerns the borrower's income, which helps them decide whether it seems like it is a good investment or not.

To purchase a home in 2021, one would have to ideally meet the criteria of debt to income ratio of 36 percent or less. I would always call a lender no matter what your DTI ratio is, they have FHA loans that are much more forgiving on the DTI, and you may not be looking at the whole picture. Like a sellable asset, savings, a loan against a retirement plan, or other ways to lower your DTI that a loan person can help you manage.

As student loans become more commonplace, the debt to income ratio has increased significantly. This has caused a shift in purchasing habits for millennials and those who are still in school.

Student loans are an extension of credit that helps them finance their education and build their future. But they should be careful not to buy right into a house that is too expensive that they cannot afford.


Student Loan Scams on the Rise

Student loan forgiveness has been all over the news, and don't be surprised if some not-so-good people start victimizing students with loans. Try the do not call list, screen your calls, and never give your personal financial or any information to someone you do not know or did not initialize the contact. Then still be careful.

Debt to income ratio after student loan forgiveness

With less debt to income from the forgiveness of student loans, students and highly educated people will have more spending power, lower rates on loans, and the ability to become a first-time buyer sooner.

As students and other people with higher levels of education are now able to pay off their student loans, this program will help those who are struggling financially to become homeowners and first-time buyers.



Infographic on Path to Homeownership to help home buyers

Student Loan Forgiveness can help Real Estate:

  • First Time Home Buyers
  • Home Owners that want to move up
  • Home Owners that can't refinance because of DTI
  • Buyers Move Away From Bad Neighborhood (Move up)
  • More people with 2nd homes or Cabins


Home Owners Moving up After Student Loan Forgiveness

With student loan debt rising at an alarming rate, many people who can buy a home have chosen to downgrade their ideal home to afford to pay for their loans.

If you are a homeowner with student loans, it can be challenging to save up money. A way to have the ability to make a change if you want is through Student Loan Forgiveness.

With the help of technology, our homes are becoming more of a necessity than a luxury. Homeownership is on the rise, attributed to many factors from the increase in rental rates and home prices to student loan forgiveness efforts.

Moving up after student loan forgiveness could help students save a lot of money and provide themselves with more room in their budget as they move towards homeownership.


How would you feel if your student loans were all forgiven?

Can Student Loan Forgiveness help Real Estate? If you are currently thinking about buying a home, but you are worried about student loans? Contact Scott because most times, the payment on a home you own is less than rent, and we still have excellent first-time buyer programs. Not to mention building net worth and equity as you pay down your mortgage helps!