What do you want to be when you grow up?

Debt-free.

The new American dream.

Student loan debt is at an all time high, with over $1.6 trillion—yes, trillion—owed in private and federal student loans (as of March 2019). For many young adults, it has prevented them from taking part in traditional events of growing up, like buying a home.

student loan debt and buying a home

How does student loan debt affect getting a mortgage loan?

For most graduates, student loans were the only way they could afford college tuition and now, it will prevent them from being able to afford much more. The average individual student loan debt is just over $32,000 and is put on a traditional repayment plan that expands over the next ten years. Taking interest payments into consideration, that can be about $300-$350 each month dedicated solely to student debt payments. For many, this is too high of a payment and an income-driven debt repayment plan is established, significantly lengthening the term of the loan and the amount of interest it will accrue over the life of the loan.

Debt-to-Income Ratio

When applying for a home loan, or just checking to see if you can even pre-qualify, the lender will examine your debt-to-income ratio as well as other factors like your credit score and employment status. The debt-to-income ratio compares the total of an applicant’s outstanding debt to the income they have coming in and using that number to determine how much of a home loan the applicant can afford. Often, the debt-to-income ratio is too high because of the large student loan balance (that is for some, higher than they may be earning) to qualify for most mortgage loan programs.

How does student loan debt affect getting a car or credit card? Or getting married?

Similar to above, the individual’s debt-to-income ratio is too high to qualify for the loan or line of credit. Many individuals with student loan debt also postpone purchasing a new car until they are better able to manage their current outstanding debt.

As for marriage, it is one thing to love and accept someone regardless of their flaws or quirky habits. It is another thing to take on their severe financial burden.

While many may have trouble wrapping their minds around the effects student loan debt can have on an individuals life, or rather an entire age group’s life, the fact of the matter is, student loan debt is a growing problem in our nation and not much is being done to get it back under control.

Help From The Student Loan Advisory Group

While we may not be able to help you qualify for a home loan, we may be able to help you get your student loan debt under control so that maybe someday soon you can do all the “grown up” things you’ve been wanting to do—like buy a home or finally be debt-free.