On August 24, 2022 The Biden Administration announced that most federal student loan borrowers will be eligible for some student loan forgiveness of up to $10,000. For low-income undergraduate students that received a Pell Grant, this amount could be up to $20,000. According to the U.S. Department of Education, a simple application for these borrowers should be ready by October. To check to see if you qualify for these programs click here. This could potentially have a significant impact on millennials homeownership rate.
Of course, this is quite a controversial program. While the timing of the roll-out of the program is certainly curious in the months leading to the mid-term elections, there are also plenty of Americans that feel frustrated for being forced to pay for other people’s student loans. Regardless of your opinion, the focus of this article is whether this program will impact homeownership?
Higher millennials homeownership rate?
The most likely demographic that will be targeted by this student loan forgiveness program are the millennials. According to a survey by Rocket Mortgage, 64.3% of millennials haven’t paid off their student loans. Although most of these loans are not preventing them from buying homes, they do contribute to financial insecurity that gives them reason for pause. According to the U.S. Census Bureau, 56.8% of millennials with student loans already own homes. Meanwhile, 55.9% of those in this group are still making payments on their student loans. On average, this group took out an average of $40,000 – $60,000 in student loans in order to pay for their schooling.
Not surprisingly, homeownership rates have always been higher among student loan borrowers. The likely reason for this is because these borrowers tend to have higher education levels and thus higher income levels. Furthermore, approximately half of these millennial homeowners purchased their homes during the period after The Great Recession. Surplus housing, low interest rates and down-payment assistance plans allowed many millennial borrowers to purchase homes regardless of their student loan status.
So will student loan forgiveness equate to a higher millennials homeownership rate? The answer is not quite clear at this time, however affordability continues to be the main reason cited by millennials delaying homeownership. Although many millennials are still planning on buying homes regardless of whether their student loans are forgiven, nearly 70% of millennial borrowers believe they could achieve their dream of homeownership years sooner if student loan forgiveness becomes a reality.
Unfortunately, the student loan forgiveness program does not assist the large population of Americans that either never took out student loans or paid off their student loans. In fact, many Americans that never went to college are likely the group that is struggling the most with homeownership. In summary, this Rocket Mortgage survey also found that the concept of student loan forgiveness doesn’t impact the amount millennials plan to spend on houses.