Student Loans and Home Ownership

A couple of seemingly unrelated articles have appeared in the news recently, but I think there is a connection that bodes well for the US economy in the future. The ramifications won’t be felt immediately, nor will they be of a huge magnitude. But it is the little things that add up to make a big difference.

In June, Forbes reported that the high level of student loan debt was making it impossible for many recent graduates to buy a home. With an average debt of $26,000, and the old interest rate of 6.8%, and a standard re-payment plan of 10 years, that equates to $300 per month in student loan payments.

One of the few truly bright decisions to come out of Congress in a long time is tying student loan interest rates to government borrowing rates.  An August 5th article from US News and World Report states that new loan rates for Fall 2013 will be 3.8% for subsidized loans and 5.4% on unsubsidized undergraduate student loans. These rates will lower the amount of student loan payments, making more income available for these students to apply toward buying a home or a car once they graduate. And that’s good for all of us.

As a Planner who helps people decide whether and how much home they can afford to purchase, it is encouraging to see that the American Dream will be more accessible to future young adults. Call or email for home affordability analysis for yourself.