First-Time Home Buyers: Is Student Loan Debt a Myth?
Freshly-minted college grads aren’t generally a primary target for loan officers and Realtors, but there are a few key things this group needs to know that can help them avoid misconceptions that can stall their progress in buying a home and building their financial future. This information is great fodder for your outreach to home buyer leads as well as your database of past clients who may have children in this age group.
Credit reporting agency TransUnion published a study titled, “Are Student Loans Really Hurting Consumers? The Impact of Student Debt on Consumer Lending,” and the results contradict much of what we hear in the media. Inflammatory headlines about student loan debt abound, the high cost of post-secondary education, the burden it puts on young people and grim statistics about the adverse effects of high debt.
On the surface, the numbers are indeed sobering:
- The number of consumers aged 20-29 with student loan debt increased over 61% between 2005 and 2015.
- Student loan balances increased 54% between 2010 and Q1 2015 – from 589 billion to 1.1 trillion dollars.
Go deeper into the study and there is interesting and encouraging information for debt-bearing grads:
- Consumers aged 18-29 with a student loan in repayment are gaining access to new – or better – loans than their counterparts without student loans.
- Student loan consumers in their 20s have surpassed their non-borrowing counterparts in obtaining mortgages, auto loans and credit cards.
- Consumers with student debt are usually able to catch up to the rest of the public in their ability to access credit within three to six years of finishing school, and that has not changed even though student loan debt has increased.
The TransUnion study is great news for lending and real estate professionals. One interpretation of the findings is that the discipline to finish school applies to other life goals as well, such as debt repayment. There will never be a shortage of doomsday headlines that can leave even the most astute consumers with misconceptions about debt, the housing market and the ability for people – especially those just starting out – to get financing and buy homes. Industry professionals must let people know that while daunting, student loan debt doesn’t have to be a roadblock to building worth and wealth through homeownership.
Home buyer drip campaigns are a great place to insert this information, but it should also be part of conversations with your database, and past and present clients who may have college-aged children. Start the conversation with the public and your referral partners so that you can counter erroneous information promulgated by media and non-industry sources that can deter consumers from exploring options and reaping benefits.