by Chris Becker
The US Federal Reserve as an interesting report out (unlike the US government, Trump can’t shutdown the Fed! on the impact of student debt on new homeowner rates in the US. Salient because the Coalition wants the education cake and to eat it too. Last year the Senate passed the HECS/HELP adjustments so that students will have to pay back their loans at lower income levels – from $45,000 instead of $52,000 previously, but at the same time want further privatisation and monetisation of tertiary education, going down the road of the barbaric US system.
If you want less home ownership, then go for it, according to the Fed:
The homeownership rate in the United States fell approximately 4 percentage points in the wake of the financial crisis, from a peak of 69 percent in 2005 to 65 percent in 2014. The decline in homeownership was even more pronounced among young adults. Whereas 45 percent of household heads ages 24 to 32 in 2005 owned their own home, just 36 percent did in 2014—a marked 9 percentage point drop.
Outstanding student loan balances have more than doubled in real terms (to about $1.5 trillion) in the last decade, with average real student loan debt per capita for individuals ages 24 to 32 rising from about $5,000 in 2005 to $10,000 in 2014.3 In surveys, young adults commonly report that their student loan debts are preventing them from buying a home.4
We estimate that roughly 20 percent of the decline in homeownership among young adults can be attributed to their increased student loan debts since 2005.
Not only does it have a material impact on actually owning a home (read:getting hitched to a lifetime mortgage), but also on the ability to pay back debts, having a “major adverse effect on their credit scores, thereby impacting their ability to qualify for a mortgage.”
And lowering the HECS/HELP threshold is going to have a material impact on the flexibility with which new Australian homeowners can make those repayments.
Read the full report here (PDF)