Will the housing market change when student loans are forgiven? ?

There are 43 million Americans with student loan debt.

With a combined US student loan debt of 1.6 trillion dollars, the average student loan debt balance breaks down to about 25,000 dollars per person. 60% of millennials cite their student loan debt as the biggest barrier standing in the way of their ability to buy a home.

A 2019 study by the Journal of labor economics indicates that for every 1000 dollars of student debt, a college graduate is a 1 to 2% less likely to own a home in their mid to late 20s. President Biden's executive action could relieve 45% of student debt loans in the US, about 20 million people could have their student loan debt canceled, bringing up the question; how might this affect the US housing market?

Overall, going forward there are definitely some long-term positive effects to forgiving this debt. 20 million Americans will see a much-improved debt to income ratio. This can lead to improved credit scores along with a higher ability to save for future down payments. For people who were really struggling, and on the cusp of being unable to afford making their student loan payments, this relief will be life changing. It will without a doubt be most impactful to low income communities. Lots of student loan payments are as hefty as mortgage payments would be. When you think about it that way, the opportunities for people to afford their rent, or put cash away for future real estate purchases are hugely improved by this debt relief.

Across the board on average, the rule accountants will give you is 28% should cap the amount of your household income spent on housing. This is nationwide. Here in the Bay Area, the average percentage of household income spent on housing is 41.9%. Given the hefty weight of housing prices here, the student debt relief order will have a less substantial impact on the housing market.

Bottom line is, the relief order will have the biggest economic impact for people who were on the edge of going under with their payments. In communities where the cost of buying a home is closer to reach for the general population (aka NOT the Bay Area housing market) there will be a higher probability of people able to buy homes in the future because their college debt was lifted.

Around these parts, we’d need loan debt relieved, along with all parking tickets, property taxes, groceries covered for the next ten years, free gas and daycare, and 25,000 bucks for everyone in order to make a dent." FUCKIN' A