Student debt boom shrinks post-grad homebuyers
Student debt is not just on the rise, but it has a first-class seat on a rocket ship to the moon. And it's leaving behind the notion of first-time homebuying for overburdened post-graduates.
HousingWire has previously covered the significant rise in student debt, but new data from the latest National Consumer Credit Trends from Equifax reports that the rate of severe derogatory or charged-off balances increased more than 36% from the same time a year ago.
But the damage in post-graduates budgets may not stop there as the market continues to grow. Balances outstanding on student loans increased more than 14%, from $746.3 billion to $852.1 billion.
Additionally, the number of student loans outstanding increased nearly 13%, from 108 million to more than 123 million.
"Driven heavily by economic factors, including unemployed or under-employed consumers going back to school along with the rising cost of tuition, student lending has demonstrated consistent, year-over-year growth," said Equifax chief economist Amy Crews Cutts.
This growth is coming at a cost.
HousingWire investments reporter Christina Mlynski earlier blogged that post-graduates are not celebrating the success of the housing market yet, because they literally can’t afford to.
Post-graduates are scrambling to cope with their ever-looming debt, making the benefits of buying a house in the improving housing market a second priority.
The latest Equifax numbers are proof of this sentiment in motion.
Comparatively, as the student loan debt skyrockets, the housing market is steadily improving.
Severely delinquent balances on first mortgages declined 23%, and severely delinquent balances on home equity lines of credit dropped 28% from February 2012 to February 2013.
"Continued weakness in labor markets is limiting work options once people graduate or quit their programs, leading to a steady rise in delinquencies and loan write-offs," Cutts said, adding relief may be on the way.
"Many policy options are being discussed regarding how to reduce some of the burden, including graduated payments that reflect the lower starting salaries of new graduates, and improve the performance of these loans," she said.