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December 14, 2011

More student debt, fewer homeowners

FinAid's Student Loan Debt Clock is just as alarming, in its way, as those clocks that relentlessly tick up the national debt.

The FinAid clock is fast approaching $1 trillion, ratcheting up at the pace of nearly $3,000 per second. Americans owe more on student loans than they do on their credit cards, a switchover that happened last year.

Consider that the amount you can borrow to buy a home depends not only on how much you earn but also how much debt you already have, and you can see what the student-loan boom has to do with the housing market.

Rick Palacios Jr., senior research analyst at John Burns Real Estate Consulting, wrote recently that homebuilders should beware.

"Faced with mounting student loan debt, poor job prospects and stagnant wages, an increasing amount of 25 to 34 year olds (a prized demographic for the housing sector) have moved back in with their parents," he wrote.

According to Palacios, the number of adults in that age bracket living with parents is up 26 percent since the Great Recession started in late 2007. They're now nearly 6 million strong.

"Today's 36.8% homeownership rate for 25 to 29 year olds is at its lowest level since 1999, and homeownership for 30 to 34 year olds is at its lowest rate in 17 years," he wrote. "The good news is that this pent-up demand will ultimately provide a much needed boost to the housing sector. The bad news is that the boost will be heavily skewed to the rental market as it will take longer than ever for young people to qualify for a mortgage, especially if more and more graduates are hit with credit blemishes from unpaid student debt."

No wonder apartment owners and developers are feeling pretty good right now.

What's your student-loan situation? Do you have any? Are you making good progress paying them off?

Are they influencing where you live?

If so, do you care?

Posted by Jamie Smith Hopkins at 6:00 AM | | Comments (16)
Categories: Renting


I have $90k in student loans from law school. I own a house with my husband, but there's no way I could have bought it without him! He has no debt and he had a downpayment saved up. Since I work for the government, the balance of my loans will be forgiven after I make ten years of payments. So I'm really, really looking forward to 2020!! :)

Having student loans is a real bummer, but for me it was worth the investment in my degree. I will make exponentially more money over my lifetime than I would have without my law degree.

I graduated from NYU in 1997 with just over $30K in student loans. Due to interest on those loans, I now owe a total of just under $25K (despite having repaid more than $25K over the years since graduation). The lenders are the ones with all the power when they know your only choices as a student are to borrow the money, or drop out of school. Talk about predatory lending practices!

Graduated in '07 with a JD and 175k of student loan debt. I was able to land a good, secure job prior to the financial meltdown. With a bit of discipline and creative budgeting, I was able to purchase a $250k home in Charles Village in 2010, at the age of 27. Still have the student loans, but have been taking a pretty big chunk out of them every year. Hope to be rid of them by 35. And I have a pretty decent emergency fund and investment account. I feel very, very blessed.

I read recently that the average student loan debt for borrowers with a bachelors degree is about $23,000. That doesn't seem troubling to me. When you consider that most people finance as much or more more than that buying a car, it seems like money well spent. Plus, the student loan interest is tax deductible (until you get in to higher income levels), and you can defer it if you fall on hard times. I'm sure there are graduates with much more debt. I expect that most of those people went to expensive private schools instead of one of the excellent state schools we have here in Maryland and elsewhere.

Good post. I work in the mortgage industry and we are very tightly regulated against predatory practices. Looks at the regs we have to comply with, I'm amazed at what is allowed to go on with student loans. Anybody considering taking out student debt - think again, and again before you do it. You're going to be married to that debt potentially for a very long time.

Student loans figured into the equation in terms of when we would be ready to buy, as well as figured in slightly in terms of our price range. We finally bit the bullet and bought this past August, at the ages of 34 and 32. I didn't have any student loans (yay, full-ride scholarships for both undergrad and master's), but my husband still has loans leftover from his first two undergraduate years of attending a private college before transferring to a state institution.

Although, to be perfectly honest, the biggest factor in when/where we bought a home came down to finding a community where we wanted to set up long-term roots. That trumped everything else.

We have friends who are slightly younger that rent. Their combined income is nearly twice what ours is (both lawyers making low six figures), but their student loan debt load is huge. They want to be in a home when their lease ends in July 2012, but aren't certain that they can swing it even though they live pretty frugally, all things considered.

As a side story that is somewhat related as a complete outlier when it comes to housing and student loan debt, I have a former classmate from my graduate program who has approximately $200k in student debt, ranging from private undergrad institution, out-of-state state-system graduate tuition, as well as Royal College of Music performance diploma. She was given a small house as a high school graduation present from her parents, who live in San Francisco. She's debated for the past 5 years about selling the house in order to pay for her student debts.

This turned into a bit of a ramble, and my apologies for that. :)

That's all interesting, folks -- thanks for sharing your experiences!

Don't worry. Student loans, just like Agency Mortgages, are backed by the gubmint. If you default, the investor gets their money anyway. Student loans also fall under the Asset Backed Security category. That piece of paper is worth a lot of money. Just imagine what they can do if you default. You still get to keep that piece of paper but if you default on your mortgage, you lose your house. It's a great thing Obama is going to forgive Student Loan debt for Public Service. More gubmint workers will boost the economy even if it costs them money to wipe your slate clean. The whole idea of limiting your student loan payments to 10% of your income is brilliant. Those Asset Backed Securities must be worth it even when they don't check your credit. Think about all those Liberal Arts degrees who will have jobs lined up. No problem paying that debt back. I bet you that default rate is near 0%. Who cares if the gubmint is handing free money for college. Everyone deserves to go to college no matter what you study or your (in)ability to repay. Kinda reminds how everyone deserves to own a house, everyone deserves to go to college, right?

It's possible to do both. I graduated in 2005 w/ $54K in student loans, I've paid a good chunk of the principle off, and I'm a homeowner. My sister graduated 2007 with close to $80K in loans & she is looking to buy a house.

I understand not everyone gets as lucky as my sister & I but it's still possible. There are alot of programs out there that eliminate loans, like public service, teachers, police officers, even the military. My friend in CA joint the military & they paid $50K of her loans.

Going into a profession & going to college you know you're going to have loans, you know you're expected to pay them back. I'm not being mean, but if you didn't do your research & you currently don't do you research then there isn't much more to say. It's not bad lending practices, it's people who don't read & just sign. If you have no intention of paying back your studen loans then don't go to college.

Jamie, you are absolutely right. I pay about $1500 a month in student loan payments, and $1250 in rent. My take-home pay is $4000 a month. Those student loan payments aren't even reducing my overall principal, which is over $400,000. I would have bought a house or apartment by now, but I know that I never will - what mortgage lender would approve a mortgage the monthly payment of which would be less than my student loan bills!? I'm at the very high end of student loan debt, but *none* of my friends, who are all around 30, have bought or have any plans to buy, a house or apartment. Life is precarious, and until student loan debt is written off, there will be very weak demand for houses.

I thankfully live with my boyfriend who owns his own house. I pay close to $2000 a month towards my student loans. If I had a mortgage or rent I would not be able to make such a payment towards my loans.

I cannot refinance my loans, despite having a credit score close to 800. I am very grateful that I am not in the situation that so many other Americans are in simply because they were told to take out the "good debt".

The point of the article is that student loan debt is costing our economy significant growth because of what can't be spent in other areas - such as housing.

Students, young AND old, with public AND private debt, are saddled with loans to the point of enslavement. I am paying nearly $500 a month just to maintain my loans - the principal hasn't dropped any in three years of such payments. My wife and I have a very modest home only because she had purchased it before we met. We struggle to save any money and have found it nearly impossible to move forward in our lives.

We can't afford to have children, buy a home in a safe neighborhood or replace vehicles aging beyond there usefulness. Is this the American dream I supposedly invested in and was sold on when I took these loans? I think not.

I wish I could trade that useless piece of paper in and let the government get its money back from the university that benefited. Today - universities and colleges sell degrees with no warranty or guarantee as to the ability of that degree to earn its owner a return. And yet we protect the lending institutions that they are in bed with, public and private, from any loss on that investment. Does this really make sense? Sure we need loans to be available so more people can go to college – but to what end? So they can be saddled with debt they have no hope of repaying?

Higher education should be held accountable for what it sells "as a means to a better future" and lending institutions should bear the risk of making those loans by bringing back all rights to bankruptcy on this debt, public and private. But we shouldn't stop there. To prevent a meltdown and a flood of bankruptcy's on student loan debt we should offer people with any student loan debt interest free repayment terms and rebates on the principal if they pay it back faster. In this way we save this type of debt from crashing down and we can get things going in the right direction with student loan debt, and maybe, just maybe - spur the economy on a little bit more.

It's time we bring common sense back to our economic policies and stop using the cowboy diplomacy/mentality as the solution to all our problems.

Debt of all kinds has killed our economy and our economic supremacy but it will be our efforts as a nation and as a bright, energized thinking populace that brings that supremacy back.

We need to stop letting the talking heads at the top tell us that this can't be done. It can be done! Of course, it will take some sacrifice by all of us – by some with no blame for this problem, but in the short term we will ALL bear the benefits of these changes in the form of a reinvigorated economy.

If your interested in more thoughts, though admittedly I haven't posted in some time, check out my blog at Education, Student Loans and (F)utility ( or visit for another take on student loan debt.

Like so many others of my generation I was raised to believe that college was a necessity in order to secure a good job and to have a bright future. So senior year came and I began looking at colleges and of course their expense. Both parents were living paycheck to paycheck and had no resources to help fund my education. But when all hope seemed lost I found what I thought was my salvation in student loans, which offered low interest rates, consolidation, and flexible payment option. Unsure of what to do I consulted my parents, school, and loan advisors who did not hesitate to tell me that while my college education would be expensive I would have a degree which would guarantee me a good job with a nice income and thus I would have no trouble paying my debt off. I was told it was an investment in my future. Like so may other naive students with no other options I signed on the dotted line.

My college experience was grand and before I knew it five years had come and gone and it was time for graduation. I was proud. Mom and dad were proud after all I was the first person to go to college in my family. Then it was time to look for a job. I naively assumed that finding a job even in an economic recession was going to be no problem after all I finally had that degree. I was wrong. After six months of trying to look for a job in my degree field and working two full-time jobs that paid only eight dollars and hour just to get by the student loans came due. I had accumulated $100,000 in student loan debt from two companies, Sallie Mae and Mohela, with a combined monthly payment of around $900.

Living on my own with nowhere to turn and no parents who had the means to help, I called my lenders to let them know that I was unable to make those payments and to see about consolidation, lowering my interest rate, and all those flexible payment options I had heard so much about several years ago. I was horrified to learn that Sallie Mae and Mohela no longer offered consolidation, that there were very few payment options available to me because I had private loans, and my Sallie Mae loans had sky high interest rates. I also found out that unbeknownst to me Sallie Mae had purchased all of my federal loans from other lenders. I subsequently found Direct Loans who bought and consolidated my federal loans. Direct Loans also offer many options for repayment for struggling graduates.

But most of my debt was in private loans and there was simply no way for me to make those payments, I mean what was I supposed to do…not pay my rent and car payment so I could pay my loans? Mohela offered forbearance which I was granted due to economic hardship but there was a catch, interest would still accrue. Sallie Mae was a different story. I could attempt deferment or forbearance but their application fees for forbearance and deferment were also sky high and there was no guarantee that it would even be granted. Not wanted to throw my money down a black hole I decided to attempt to pay Sallie Mae what I could. Then the non-stop harassing phone calls began. I would receive around half a dozen phone calls a day because my account was past due always speaking to someone I could barely understand in another country. I once again naively believed that because I was doing my best all would be right with the world however I quickly was threatened with delinquency and default. After several months of paying what I could and Sallie Mae’s relentless phone calls I did the only thing I knew to do to escape the horrors of default and I went back to school part-time at a community college, which was inexpensive and that I paid for out of pocket, to put all my loans in deferment.

Here we are two year later and I am still in school. I have found a job. I work in public service and while meaningful it doesn’t pay very much. I also got married to a lovely man who unfortunately makes significantly less then even I do. But we have each other, a cute little one bedroom apartment which we love, and we were optimistic.

One day I went to check on my loans and I was once again horrified to learn that my original debt had ballooned to $149,000 due to capitalized interest and that my Sallie Mae loans have such a high interest rate that my loans are accruing over $500 every month just in interest. Again I began to panic. I’m not doing much better then I was two years ago. We are living practically paycheck to paycheck and are nowhere near close to being able to afford over $1000 payments every month. Together after taxes and health insurance we bring home around $42,000 a year. I am literally accruing more interest every month then I can afford to pay let alone anything going to the principle. Even if I could make the payments by the time it is all said and done I will have paid at least triple the original loan amount due to interest; that hardly seems fair. If I paid the lenders what they were asking for every month I would be handing over 60% of my take home pay which means I will have far less then even minimum wage to live on. So what was the point of going to school in the first place? I would gladly give it back if I could. I have contacted credit counselors, attorneys, conducted research on the internet for help and resources, I have even contacted the Attorney’s General’s Office and Congressman and found very little help other then the ominous warning not to default on my loans.

Desperate not to accrue even more debt I am left with questions…what do I do? And where are all those thing that were promised to me at the beginning? Why is there no relief for the college graduates who are in over their heads? It appears that default is inevitable. And because these debts can not be bankrupted, there is no statue of limitations to pursue these debts, and wages can be garnished there is no incentive for these lenders to work with their clients thus creating a predatory lending system that is creating indentured servants out of an entire generation. As of now our dreams of owning a home and having a family are gone which I have read in my research is the case for many people. Something has to be done. An entire generation is drowning in debt. A generation that will not be able to afford to buy houses, buy goods and services like the last generation, and will have smaller or no families because they can not afford to. Further our generation will not be able to send their kids to college and certainly with the horrifying lessons we have learned in dealing with these private lending companies we won’t want to. This will impact the economy for years to come.


Speak for yourself--not an entire generation of which I am part of.

Get a second job and stop looking for easy fixes. It'll suck, but so what: previous generations died on the battlefield. 20 hours a week extra is better than losing a leg.

I've got 130k of student loan debt for a worthless degree from a money hungry school. Unfortunately had little to no education on financial choices when they conned me into signing the dotted line. Now with the economy as bad as it is, I'm looking at a never ending spiral downward. Forget owning a home, a new car, having kids, saving for retirement, or education. I make one bad choice and threw my life away. I've learned my lesson. Please forgive!

Left school with about $30,000 in loan debt - not bad for a somewhat prestigious, private technical university and an engineering degree. If it weren't for Pell Grants and scholarships, I'd be in MUCH worse shape. I was also lucky enough to know what I wanted to go to school for, though the reasons for wanting to go into engineering were mostly to do with a stable job outlook and decent wages.

Through a co-op program while in school I earned experience and made connections in the industry which led to a job right out of college and it's been steady going ever since. My payments are high, but my salary allows for me to make them on time and afford a comfortable lifestyle.

Do I wish I had an extra $400 every month (or even part of that) to spend on a mortgage, rather than rent? Do I wish I had it to spend on a more reliable vehicle or help pay down credit card debt that I accumulated in college? Of course! (Predatory lending in the form of credit cards to college students that don't have jobs is a different issue entirely... $8,000 in credit card debt is an acceptable risk by banks??) My only issue is that though my bills are manageable, all I seem to be doing is chipping away at debt when I could be spending money on things in the economy that produce jobs! New car, new clothes, things to furnish a house, entertainment, etc., etc.

Though I do think that help should be offered to students that are struggling with debt, I believe that there needs to be more education ABOUT education. Going to a private institution at $30,000/year to get an art history degree? Or a sociology degree? Really? Do you think that's cost-effective? People need to know how much different professions typically pay, on top of knowing what their personal skill set and preferred job is BEFORE going to college.

It needs to be stressed by guidance counselors in high schools everywhere that sometimes the name on your diploma just isn't worth what you need to pay to get it, or what you'll be making when you're done. Also, inform students of what professions are out there, what they entail, and what they pay. You'll get some that say "oh, I want to do that because it makes the most money", and some that say "I want to do that because it involves one of my passions", but students need to be informed of the pros and cons FINANCIALLY, as well.

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About Jamie Smith Hopkins
Jamie Smith Hopkins, a Baltimore Sun reporter since 1999, writes about the regional economy. Her reporting on the housing market has won national and local awards. Hopkins is a Columbia native and has lived in Maryland all her life, save for 10 months spent covering schools in Ames, Iowa.
She trained to become a wonk by spending large chunks of time as a geek and an insufferable know-it-all.
Baltimore Sun articles by Jamie

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