Borrowed Futures: The Student Loan–Mortgage Connection

• In Event: Inequality, Poverty, and Mobility Section Roundtables
  In Refereed Roundtable (60 minute): 16. Lifecourse Mobility

Abstract

This study examines how student loans and mortgages intersect to shape racial inequality in wealth-building. Student debt can expand access to education but may constrain later asset accumulation. At the same time, mortgages remain the primary pathway to homeownership and home equity in a racially stratified housing finance system. This study asks whether racial disparities in student-loan profiles help explain racial disparities in mortgage outcomes and, if so, where in the housing transition the linkage is strongest.
Using the 2022 Survey of Consumer Finances (SCF) with survey weights and five imputations pooled to incorporate imputation uncertainty, the paper analyzes White, Black, Hispanic, and Asian households (Asians separately identified). We model a seven-measure student-loan profile (loan holding, number of loans, total borrowed, outstanding balance, largest-loan amount, interest rate, and federal indicator) and seven mortgage outcomes covering homeownership, mortgage indebtedness among owners, mortgage amounts and balances, mortgage interest rates, and FHA/VA use. Logistic and OLS models adjust for sex, age, marital status, education, and household income. We then estimate Karlson–Holm–Breen (KHB) decompositions to assess how much student-loan profiles statistically account for racial gaps in mortgage outcomes (interpreted as accounting, not causal mediation).
Results show pronounced racial stratification in student-loan exposure and cumulative burden, particularly among Black households, while borrower-only differences in observed loan terms are comparatively muted. Mortgage inequality is strongest at homeownership entry, in post-entry mortgage indebtedness among owners, and in FHA/VA sorting. Decomposition findings indicate a selective linkage: student-loan profiles account for about 27 percent of the Black–White gap in mortgage indebtedness among homeowners but explain little of the homeownership gap or disparities in mortgage amounts, rates, or FHA/VA use. Overall, student debt appears more consequential as a post-purchase constraint than as a primary entry barrier, while mortgage-market segmentation remains central to racial stratification in housing finance.

Authors

• Jing Zhang, Florida State University

• John Reynolds, Florida State University

• Paromita Sanyal, Florida State University