Is Student Loan Debt Discouraging Homeownership among Young Adults?

Abstract

Madison a b s t r a c t Amid concern that rising student loan debt has social and economic consequences for young adults, many suggest that student loan debt is leading young adults to forgo home buying. However, there is little empirical evidence on this topic. In this study, we use data from the National Longitudinal Survey of Youth 1997 to estimate associations of student loan debt with homeownership, mortgage amount, and home equity. We use a variety of methodological techniques and test several model specifications. While we find a negative association between debt and homeownership in some models, the association is substantively modest in size and is entirely driven by the debtor-nondebtor comparison; we find no association between debt amount and homeownership among debtors. Overall, we find limited evidence that student loan debt is responsible for declining young adult homeownership. Instead, indicators for the recession and transition to adulthood markers have a stronger association with homeownership. introduction Student loan debt has risen dramatically in the past several decades, doubling since 2007 and now topping 1 trillion dollars in the aggregate ðProject on Student Debt 2011; Federal Reserve Bank of New York 2013Þ. The rapid rise in student loan debt has, justifiably, led to a great deal of scholarly and public concern regarding the potential social and economic consequences of a generation saddled with debt. Recently scholars and policy makers have speculated that the rise in student loan debt may be transforming the transition to adulthood among young adults under the age of 30. In particular, amid concern that high levels of debt may be slowing the housing market recovery, many media outlets and financial experts have suggested Social Service Review (December 2015).

Student Loans and Homeownership

“…Using the National Longitudinal Survey of Youth, 1997, Houle and Berger (2015) estimate that a $1,000 increase in student loan debt decreases the probability of homeownership by 0.08 percentage points among a population composed largely of 20-and 25-year olds. Similarly, using the National Education Longitudinal Study of 1988, Cooper and Wang (2014) find that a 10 percent increase in student loan debt (approximately equivalent to a $1,000 increase for our sample) reduces homeownership by 0.1 percentage points among 25-and 26-year olds who had attended college.…”

“…Researchers have previously attempted to isolate the effect by controlling for a set of observable student characteristics (Cooper and Wang (2014) and Houle and Berger (2015)). …”

Debt, Jobs, or Housing: What's Keeping Millennials at Home?

“…2 See, for example, Mykyta and Macartney (2011). 3 The link between homeownership and student debt has been examined in the PSID and the NELS88 by Cooper and Wang (2014), in the SCF by Gicheva and Thompson (2014), in the 1997 cohort of the NLSY by Houle and Berger (2014), and in the CCP by Bleemer et al (2017). Kurz and Li (2015) address the link between student debt and auto purchase.…”

Young Adults’ Race, Wealth, and Entrepreneurship

“…Estimating missing data was preferred over listwise deletion in order to limit the threat to validity and to improve generalizability (Rose and Fraser 2008;Rubin 1987). Similar to the Race Soc Probl (2016) 8:42-63 47 procedures that Houle et al (2013) and Houle and Berger (2014) undertook to account for missingness in NLSY data, we limited our samples to include only the young adults who provided complete information for wealth and selfemployment. We then estimated their missing information on the rest of the control variables.…”