Skyrocketing student loan debt put homeownership out of reach for 400,000 Americans in their 20s and 30s from 2005 to 2014, according to a new report from the Federal Reserve.
Starting from census data showing a drop of 8.8 percentage points in homeownership among that age cohort, the Fed’s researchers estimate that rising student loan balances account for roughly 2 percentage points of that drop, or nearly a quarter of it.
“While investing in postsecondary education continues to yield, on average, positive and substantial returns, burdensome student loan debt levels may be lessening these benefits,” the researchers conclude. “As policymakers evaluate ways to aid student borrowers, they may wish to consider policies that reduce the cost of tuition, such as greater state government investment in public institutions.”
From 1989 to 2016, the share of American families of all ages with an outstanding student loan balance rose from 8.9 percent to 22.4 percent, according to the Fed’s Survey of Consumer Finances. The median family with student loan debt now owes $19,000 on those loans, according to the survey, up from a median balance of just $5,600 in 2016 dollars in 1989.
While the Fed’s latest report focuses on young families, those headed by older adults are also experiencing rising student loan burdens.
Thirty-four percent of families headed by someone between 35 and 44 have outstanding student loan balances, as do 24 percent of families headed by people in their forties and fifties.
Student loan indebtedness is now just as prevalent among these middle-aged Americans (24 percent) as it was among 18- to 34-year-olds (24 percent) in 1998.
If those trends continue, in just a few years people with student loan debt will account for a majority of households headed by someone under the age of 25. And as that generation continues to age, many will carry their debt with them, some well into retirement: In 2016, for instance, 3.6 percent of Americans age 65 to 74 still were paying off a student loan, up from 0.6 percent as recently as 2001.