Study: Student Loans Aren't The Biggest Reason Millennials Don't Buy Homes

Aug 20, 2015

A new study challenges the prevailing notion that student debt is the primary reason young adults delay buying a home. The report was co-authored by Dartmouth Sociology Professor Jason Houle and University of Wisconsin Social Work Professor Lawrence Berger. It’s published by Third Way, which describes itself as a centrist think tank.

Houle and Berger say there’s no doubt that student debt is on the rise and homeownership by recent college grads is falling. A large number of media reports make a connection between those two trends. But the two professors were skeptical that loans were the biggest reason many millennials steer clear of the real estate market. Houle says data from the National Longitudinal Survey of Youth suggest two more powerful reasons that young home buyers are in short supply.

“Student loan debt doesn’t seem to be the primary thing driving these at all. What appears to be driving this is the fact that young adults are taking longer to transition to marriage and parenthood and these transitions tend to come before home ownership. And this is a big recession story. You find the big recession is more responsible than [the] student loan is per se,” Houle said.

Houle says the generation that came of age during the recent recession saw adults struggle to pay mortgages as unemployment rose. So younger people are understandably wary about taking that risk for themselves, especially because, for many of them, jobs are still hard to find. And if they do find work they often choose to rent rather than buy, in case they need to move to stay employed. Houle’s data analysis also shows that under-educated millennials can easily become what he calls “boomerangers.”

“The ones who are not employed full time pretty quickly after attaining residential independence have a high risk of ending up at their parents’ front door,” Houle said.

"The ones who are not employed full time pretty quickly after attaining residential independence have a high risk of ending up at their parents' front door." - Jason Houle, Dartmouth Professor

He’s presenting a paper about that at a forthcoming conference.

Houle says some media overstate the student loan problem by reporting the average debt burden — about $30,000 — rather than the more typical median, which is about $15,000. That’s still too high, he admits, and reflects a troubling rise in college costs. College debt, he argues, can be beneficial if it keeps students in school. The problem is that when the initial scholarship runs out, and families cannot pick up the difference or take on added loans, many students drop out. That’s one reason they cannot find the work they need to form relationships, have children, and buy homes.

Houle hopes the study he co-authored will spur conversation about whether we are asking young people to take unwise risks, borrowing too much for both education and housing. But he says it's important to look at all the factors keeping the American dream of home ownership out of reach — not just student loans.