Is Student Loan Debt Discouraging Home Buying Among Young Adults?

• In Event: 432 - Section on Aging and the Life Course Paper Session. Changes in the Timing of Life Course Transitions in Young Adulthood: Taking Longer, Maybe Never

Abstract

Scholars, policy makers, and journalists have long speculated that the rise of student loan debt may lead to a range of negative outcomes among the recent generations of young adults. Most recently, many have suggested that student loan debt is holding back the housing market recovery, and that high debt burdens are leading young adults to leave the housing market, en masse. But despite these strong claims, there is very little empirical evidence on this topic. In this study, we use data from the National Longitudinal Study of Youth 1997 cohort and ask how student loan debt accumulation is associated with home ownership outcomes (1) owning a home; 2) having a mortgage; 3) amount of mortgage debt among homeowners) in the current generation of young adults. In addition, given large racial and socioeconomic disparities in home ownership and student loan debt, we also examine whether the association between student loan debt and homeownership outcomes differs across racial and socioeconomic groups. We use a variety of methodological techniques; including OLS and 2-stage least squares instrumental variables, and find limited evidence that student loan debt is reducing home ownership among young adults. Although we find a significant association between debt and home-ownership, the association is substantively modest in size, suggesting that student loan debt is not a drag on the housing market. However, we find important race differences in the association between debt and homeownership, such that the effect of student loan debt on ownership outcomes is stronger for blacks than whites.

Authors

• Jason N. Houle, Dartmouth College

• Lawrence Berger, University of Wisconsin-Madison