TransUnion: Student loans do not impact housing

Student debt keeps growing but homebuyers still buying

Despite the level of student loan debt rising to well above $1 trillion, young buyers are not being inhibited from obtaining a mortgage due to their debt, according to a new report from TransUnion.

According to the latest report from the Federal Reserve Bank of New York, student loan debt rose $32 billion in the first quarter to $1.19 trillion total, but recent reports from Capital Economics have suggested that growing amount of student debt isn’t actually preventing millennials from buying a home.

A new report from TransUnion shows that not only are younger consumers with student debt able to get a mortgage, they are also quite adept at making their payments as well.

According to the TransUnion report, consumers between the ages of 18 and 29 with a student loan in repayment are “generally able” to gain access to new loans and perform as well or better on those new loans as similarly aged consumers without student loans.

The study also showed that in only three to six years, student-loan consumers in their twenties have been observed to pass similarly aged consumers without a student loan in overall loan participation rates on mortgages, auto loans and credit cards, an act the study calls the convergence point.

“Going to school impacts young consumers' access to credit; while in school, students may be less likely to have a job and generate the income necessary for loan approval. However, most catch up once they leave school—and their ability to catch up has not changed over the past decade,” said Steve Chaouki, executive vice president and the head of TransUnion’s financial services business unit. “Our study demonstrates that consumers in their 20s with student loans in repayment—that is, once they finish school—are in fact able to access credit at levels similar to or better than their peers who do not have student loans.”

To get the results of its study, TransUnion observed borrowers with student loans who entered repayment from three different timeframes: Q4 2005, Q4 2009 and Q4 2012. Charlie Wise, co-author of the study and vice president in TransUnion’s Innovative Solutions Group, said that those time periods were chosen for specific reasons.

“We believe most people would agree that 2005 was a ‘normal’ year, in that the economy was strong and credit was readily available to younger borrowers. In other words, it is fair to use 2005 as a baseline for comparison,” Wise said. “Q4 2009 was in the immediate aftermath of the financial crisis, while Q4 2012 represented the most recent data available for observing trends over an ensuing two years.”

Those borrowers were compared with a control group who did not have student loan debt.

The results from the study show that the changing economy and shifts in the ability to access consumer credit greatly impacted younger consumers overall, both those with a student loan and those without one.

The percentage of consumers from 18-29 with mortgages, credit card or auto loans dropped significantly between 2005 and 2012.

But the study showed that this drop impacted both consumers with student loans and those without in similar fashions. The TransUnion study showed that the presence of a student loan in repayment did not appear to “disproportionately impact” consumers with student loans.

The study posits that other macroeconomic factors, such as rising unemployment rates for younger consumers and tightening lending standards, were likely “far larger” contributors to decreased consumer credit originations and participation by all consumers in this age group.

“Participation rates for mortgages, credit cards and auto loans dropped significantly between the 2005-2007 and 2012-2014 timeframes—and impacted both consumers repaying student loans and those in the control group to a similar degree,” Wise said.

“However, just as we observed in 2005, student loan borrowers in 2012 generally left school with lower loan participation rates than their control counterparts, likely due to difficulty in accessing credit while a student with little or no income,” Wise continued.

“Over the next two years, student loan borrowers were actually more credit active in opening new auto and credit cards, enabling them to close this gap,” Wise said. “Further, we saw the rate of new mortgage originations nearly identical between the student loan and control groups, keeping the mortgage gap constant – the same thing we saw in the 2005 cohort. Even the immense growth in student loan balances does not appear to be driving any different impact on new credit access today than what we saw a decade ago.”

See below for the results of the TransUnion study. The chart below is the percent of consumers in study with specific consumer credit types in 2005 and 2012.

Study Group Year


Consumer Group



Auto Loan




Credit Card


Start of Repayment

2 Years Later

Start of Repayment

2 Years Later

Start of Repayment

2 Years Later




Student Loan Group














Control Group

















Student Loan Group














Control Group














As the chart shows, overall loan participation fell in the wake of the financial crisis, but student loan debt appears to have not disproportionately affected mortgage debt.

The study also showed that while those with student loans may be less likely to take out additional loans immediately after leaving school, they “catch up” with their non-student loan counterparts in fairly short order.

“Despite having thousands of dollars more in average student-loan debt in more recent years, our study clearly shows that student-loan borrowers in repayment continue to catch up to the control group—those without a student loan—in a relatively short period, due to their higher new loan origination rates,” said Wise. “This is an especially important finding, because it shows the dramatic rise in student loan balances has not materially impacted younger consumers in gaining access to mortgages, auto loans or credit cards, or in their ability to successfully manage their new credit obligations.”

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