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Student Loans May Not Be Impacting Home Ownership For Millennials As Much As Some Say

There have been many recent articles and reports about  the millennial generation and why they are not buying homes at the same rate as earlier generations did at their age.  Many point to the burden of student loan debt as a cause of their inability to qualify for a mortgage thereby holding the millennials back from buying a home.  However, a new study by TransUnion  suggests this may not be the case.

The study by TransUnion, which looked at people with student loans and their participation in various types of loans, both at the beginning of their student loan repayment period and two years later as well, for a period beginning in 2005 and then again in 2012 and then compared these rates to a “control group” which consisted of people without student loans.  As the table below shows, participation rates for home mortgages, credit cards and auto loans all dropped significantly between the 2005-2007 and 2012-2014 timeframes for both groups,  the people with, and without student loans.  The report suggests that, for both starting periods (2005 and 2012) the fact that the student loan group had lower participation rates in credit was related to them just completing school and having little or no income. This theory appears to be supported by the fact that when you look at the two year period following, the “student loan borrowers were actually more credit active” in obtaining auto loans than their counterparts and the rate of new home mortgage originations during the next two year period were nearly identical between the student loan and control groups for periods looked at.

 

Student loan borrowers may be better credit risks…

The results from the TransUnion study also showed that consumers in the age group of 18-29 (typical age for consumers with student loans) that have a student loan in repayment “generally had better performance on new accounts than their peers without student loans.”

 

Millennials with student loans should be viewed as an opportunity for lenders…

The report concludes saying their findings are important “because it shows lenders that rather than being concerned about student loan borrowers’ ability to manage new credit, this may actually be an attractive marketable group, both in terms of higher credit demand as well as potentially better repayment performance,”

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Percent of consumers with specific credit types versus people with student loans

Source: TransUnion

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