Student Debt Decreases Wealth & Homeownership

Wealth, Homeownership Lag for Americans With Student Debt

Americans who take on debt to fund their university studies tend to have less wealth and lower homeownership rates over long periods than those who don’t rely on loans, research from the Federal Reserve Bank of Boston finds.

U.S. student loans outstanding climbed past the $1 trillion mark in 2013 to become the second-largest type of consumer debt, after mortgages.

The Boston Fed paper says its findings aren’t sufficient to argue student debt accumulation causes lower wealth and homeownership.

“However, the data do indicate that there is at least a strong negative correlation in the cross section between student loan debt and total wealth accumulation (net of student loan liabilities) among homeowners,” write Boston Fed economists Daniel Cooper andJ. Christina Wang.

The gap was largest among households with a head 20-24 years old, where the homeownership rate differential for the two groups was about 9 percentage points.

The research confirms previous Fed findings that student debt delays home purchases but may not rule them out entirely. The difference in homeownership rates between households with outstanding student debt and those without is just 1 percentage point for 35 to 39-year olds, the Fed paper says.

Original Article: http://blogs.wsj.com/economics/2015/01/08/wealth-homeownership-lag-for-americans-with-student-debt/


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