Homebuyer demand exploded in 2017, and is expected to continue to surge in 2018 despite rising home prices, low inventory levels and increased competition.

However, as Millennials increasingly enter the housing market, one factor stands above all the rest, blocking the path to homeownership: student debt.

In fact, an overwhelming majority of Millennials with student debt do not own a home, and believe this debt is the cause for the delay, a recent study from the National Association of Realtors and nonprofit American Student Assistance showed. NAR estimates this student debt could be delaying homeownership for up to seven years.

But now, a new study shows the student debt crisis could be worse than anyone thought. Currently, at nearly $1.4 trillion in outstanding loans, student debt is the second largest source of household debt after housing, and the only form of consumer debt than continued to grow after the Great Recession, according to a new report from The Brookings Institution, a nonprofit public policy organization.

The report analyzes new data on student debt and repayment, released by the U.S. Department of Education in October 2017.


The infographic above shows even as the student debt crisis deepens, minorities are hit the hardest.

But perhaps this should come as no surprise, as the median net worth among blacks at $11,030 falls far below the white median net worth of $134,230, according to data from the Economic Policy Institute.

Even when just looking at college graduates, that gap remains as black college graduates have a median net worth of $23,400 while white college graduates have a median net worth of $180,500. But of course, surely this changes when only considering those with a graduate or professional degree.

Unfortunately, no.

The chart below shows among blacks with a graduate or professional degree, the median net worth is $84,000, compared to $293,100 for whites.

And while it is unclear exactly how much of the student debt crisis is holding back the black homeownership rate, once again it falls significantly below the white homeownership rate of 63.9% with its mere 42% in the third quarter of 2017, according to the U.S. Census Bureau.

During 2015, the most frequently cited reasons black applicants were turned down for mortgages include 31% for credit history, 25% for debt-to-income ratio and 13% for collateral, according to data analyzed by the Pew Research Center. This is compared to the most frequently cited reasons white applicants were turned down for mortgages where debt-to-income was the No. 1 reason at 25%, followed by credit history at 21% and collateral at 18%.

Perhaps the high number of defaults on student loans among the black population could be partially to blame for worse credit history.

Whatever the reason for the lower homeownership rates, it is clear that as long as 70% of the black population is expected to default on its student loans, saving up for a home could prove to be an impossible feat.

Overall, the infographic above shows 40% of college entrants could struggle to repay their loans, and eventually fall into default. This represents a severe crisis for the student loan market, and could have devastating impacts on their ability to purchase a home.