✨ POOF ✨ Debt is gone!
Pres. Biden Campaigned on Student Loan Forgiveness. The Impacts on Housing Would be Significant.
Hello friends,
On Tuesday the Department of Education announced 40,000 borrowers would receive "immediate debt cancellation" of their Federal student loans. Under the Public Service Loan Forgiveness Program those borrowers who work in the public sector and have made ten years worth of payments are eligible for remaining balances to be forgiven. While significant for those individuals having debt erased, the impact to the overall economy is negligible. However given that the total student loan portfolio currently backed by Washington D.C. sits at 1.75 trillion dollars, this could be the tip of the iceberg to something much more meaningful.
Bubble Trouble, Steve vs. Unions and "What would ya say you do here?" all in this week's episode...don't miss it!
A Problem Only Getting Worse
In 1970 the average debt for a graduating student was $1,070 , the equivalent of $7,458 when adjusted for inflation. Today that figure is $31,100. In addition to burdening personal balance sheets this tab is also preventing home purchases. A recent study found that of non homeowner millennials, 53% haven't bought a house due to student debt either disqualifying them from financing or making affordability a major concern. A 2021 Freddie Mac study found that while the national homeownership rate was 65%, millennials (born 1981-1996) lagged both Gen X and Baby Boomers at only 43%.
Fulfilling a Pledge
Nearly 15 million millennials carry student loan debt according to Educationdata.org, more than any other generation. Monthly payments differ within this group based on factors like payback period, post graduation income level, amount borrowed, but tends to average near $250.
While running for office in 2020, then Vice President Biden tweeted “We should forgive a minimum of $10,000/person of federal student loans, as proposed by Senator Warren and colleagues,” If enacted this would come with an estimated price tag of 377 billion dollars, but would elevate 100% of debt for roughly a third of all borrowers.
Steve’s article on rising mortgage rates was featured in this month’s Saratoga Business Journal
And the winner is....
This level of debt relief would create a new pool of homebuyers; those previously relegated to renting due to DTI (debt to income) lender restrictions. Freeing personal balance sheets of a $250 monthly obligation translates to nearly $40,000 of additional purchasing power on a 30 year fixed rate mortgage. Millions of additional buyers would further strain an already under supplied housing market, resulting in a windfall for home sellers/owners.
Loan forgiveness' is for some a contentious topic. Less debatable however is that owning real estate continues to be one of the more desirable asset classes to have exposure.
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NYS Fair Housing Notice
Steven Luttman
Broker/Owner SJLincoln Realty
35 Bath Street, Ballston Spa NY 12020
(518) 309-8584