While paying back student loans is important there is no reason why higher education debt should stop one from becoming a home owner. Susan Dynarski a professor at University of Michigan, states that the rate variances between college educated home owner and non college educated is larger than college students graduating with or without debt. It is a myth that college debt needs to keep a person from home ownership. Many who wish to purchase a home are daunted by the idea of a large down payment (20%) which could take a decade or two to save for. It is important to note, however, that there are many programs which lower the required percentage of cash needed for a down payment on a home. There are some disadvantages that come with these programs such as higher insurance fees and a higher chance of foreclosure. There is also a debt to income barrier that must be considered. Some loans will not be approved if the ratio is too high but there are various options available such as refinancing to help combat this issue. Millennials with a large amount of student debt are not prohibited from homeownership and have many options.
- 1Having a college degree is shown to increase the likelihood of home ownership.
- 2Millennials should work first on paying off their student loans to increase their savings.
- 3You can refinance a student loan with a private lender to lower your interest rate in order to increase your income-to-debt ratio.
The striking gap in homeownership is not between college-educated people who did and did not borrow, but between those with and without a college education.