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  • Why buying a home can be almost impossible with massive student loan debt

    February 12, 2018
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    • Eighty-three percent of people ages 22 to 35 with student debt who haven’t bought a house yet blame their educational loans.
    • Owning a home, the most common way Americans build wealth, can become a distant dream for many crushed by student debt.In the late 1990s, Ed McKinley fell in love with a $65,000 house by a lake in New Hampshire.

      The owners let him move in early and pay rent until the buying process was completed.

      Inside his new home, McKinley installed a modern stove, painted the walls and began to redo the floors.

      Then came the bad news.

      “The mortgage company decided that my income-to-debt ratio was a little bit higher than they were comfortable with,” McKinley, 59, said.

      They were referring to his $34,000 in federal student loan debt.

      He had to pack up and leave.

      “It’s crushing,” McKinley said, choking up. “I have a very strong desire to own a piece of land that I can put my signature on.”

      Student loan debt has become a major barrier to home ownership in America.

      Some 45 million people in the United States carry student debt. The average borrower owes more than $30,000, according to Student Loan Hero, a website for managing education debt. Almost a fifth owe more than $100,000, according to the National Association of Realtors.

      People’s monthly student loan payments can eat up a large slice of their income, threaten to push down their credit scores and make saving nearly impossible — all huge impediments, of course, to landing in a house.

      For every 10 percent in student loan debt a person holds, their chance of home ownership drops 1 to 2 percentage points during their first five years after school, according to the Federal Reserve.

      More than 80 percent of people ages 22 to 35 with student debt who haven’t bought a house yet blame their educational loans, according to the National Association of Realtors. Homeownership for young adults dropped to 40 percent in 2016, down from 43 percent in 2013, according to advocacy group Young Invincibles.