A new paper from the Federal Reserve has revealed that there’s been a 20% drop in homeownership among young people. Normally, the end of college signifies the start of a new career. That career often leads to homeownership and maybe even the start of a family. But, things aren’t the same as they were just a decade ago. Student loan debt is to blame.
The Federal Reserve is finding that the $1.5 trillion worth of student loan debt is changing the economy. And not for the better. As the next generation goes through high school, we’re seeing the last of the millennials make their way through. Perhaps no other generation has had it as difficult as them.
The Great Recession has stunted their economic growth for the last decade. A lot of colleges made big promises to lure in the most vulnerable. They said they had incredible job placement rates. So, people bought in, signed the dotted line, and grated four years later. Instead of the job they were promised, they got buried in student loan debt.
The thing about student loan is, it doesn’t go away. If you don’t have a job or find yourself struggling, it doesn’t matter. The payment is still due every month. With no extra money, young adults are finding it nearly impossible to invest in the future. They’re not saving for retirement, buying health insurance, or a home for their growing family.
How Is Student Loan Debt Impacting Home Ownership?
This new study by the Federal Reserve shows just how much student loan debt is hurting young adults. Homeownership rates fell 9% over the last decade. That might not seem a lot, but it’s a major hit to the economy. It equals about 400,000 potential homeowners who wanted to buy a home but couldn’t. And the Fed blames student loan debt as the culprit.
“We’re still selling people on the idea that higher education, no matter its cost and no matter the level of debt, is the ticket to a better more stable, more healthy life,” said Julie Margetta Morgan, a fellow at the Roosevelt Institute. “For many people, that’s not the case.”
This study is yet another revelation about how much student loan debt is impacting young adults today. It’s not just the housing market, but every other financial aspect of their life. For example, millennials are waiting longer to get married and have children. They are living at home longer. They’re also defaulting on their debt at a much higher rate than any other generation.
Millennials also have little-to-no savings. It was recently revealed that the majority of young people don’t have access to even $400 to pay for an emergency. And as previously stated, they’re not saving for retirement. Life is an all-around struggle for them.
The Economic Winds of Change
Bubbling up to the surface from this student loan debt crisis are new financial goals and practices. Never before in American history has there been such a change. Socialist ideas are becoming the new norm. We saw this in the 2018 midterms as new, upcoming stars were elected into office, most of them with socialist ideals.
They have their own ideas about paying off the student loan debt. But this isn’t the only change how America sees the future. Unlike previous generations, millennials do not view home ownership as a worthy investment. A lot of that has to do with watching their parents go into foreclosure during the Great Recession.
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Furthermore, millennials are more likely to group together in cities where the cost of rent is astronomical. Consider New York and Los Angeles. Who can afford a home in these cities besides the super-rich? Instead, if they’re not living at home, they’re grouping together and sharing the rent. It’s not worth it to buy a home in an expensive market with a limited income.
It would certainly seem as if the American Dream is coming to an end. Or, at the very least, the idea of the American dream is rapidly evolving. Student loan debt is at the very center of this debate. Hopefully, opportunities will continue to grow as the economy improves
