Reconsidering student loan debt and home ownership

Stefanie Botelho's picture

Last spring, the Federal Reserve Bank of New York (FRBNY) released new evidence on the relationship between student loan debt and home ownership. It found that during the financial crisis, young people with student loan debt had become less likely than those without debt to take on mortgage debt (a proxy for home ownership) by the time they reached age 30. It was suggested that this reversed the long-run trend in which individuals with student loan debt, who tended to be wealthier and more educated than their debtless peers, were more likely to own a home. Although this analysis provided useful information about student loan debt, it is subject to a number of limitations.

In this post, I expand on that analysis and overcome some of those limitations by using a data set that is better suited to answer the question at hand.[i] The Survey of Consumer Finances (SCF), which is administered by the Federal Reserve Board, captures household debt portfolios as well as information on demographics and earnings. Although the SCF collects data only every three years, having begun in 1989, it spans a longer period of time than the FRBNY study, which only includes data beginning in 2003., This longer time frame is helpful in exploring long-term trends.

Read more