The Problem isn’t Student Loans, it’s Student Dropouts | Katonah NY Real Estate

 

Student loans have been a problem for first-time buyers for generations, but they didn’t stop first-timers from buying 40 percent of the homes sold ten years ago. So what’s the whining all about?

One thing that’s different is the size and scope of the problem. Overall student loan debt recently breached the $1 trillion mark. There are more individuals with student loan debt, and more of it, than ever before. Compared to past generations, income growth for young people in the U.S. today is stagnant. Yet going to college still increases one’s earning potential.

“For those who had to finance college with loans, the burden of repayment relative to income remains the same today as in the 1990s. Which begs the question, if young people in the 1990s found a way to buy a home at the same time as having student loans, then why wouldn’t young people today, with the same relative burden, be able to do the same?” writes CoreLogic’s Mark Fleming in the firm’s blog

Research by Jeffrey P. Thompson, economist at the Board of Governors of the Federal Reserve System, shows that when carefully empirically modeling the level of educational attainment among those who have student loan debt, there is little evidence of a strong reduction in the likelihood of homeownership for those who complete their education. The research does find the likelihood of homeownership is reduced for those who have student loan debt, but do not complete their education. Accumulating the debt, but not earning the degree, results in the burden without any benefit. Research still shows that, on average, getting a college degree results in higher earnings.

 

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http://www.realestateeconomywatch.com/2014/07/the-problem-isnt-student-loans-its-student-dropouts/

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