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Today, real estate agents joined the Arizona Public Interest Research Group (Arizona PIRG) to call for an extension of the low rate on federal student loans. Congress has until July 1 to stop the interest rate on subsidized Stafford student loans from doubling to 6.8 percent. Student loan borrowers carry more than $25,000 in loans on average, which can hurt their creditworthiness and can stop them from qualifying for mortgages.
“There are fewer first time home buyers than there were a decade ago,” said Brittney Hernandez, a realtor for Arizona Elite Properties. “Without the demand from first-time home buyers, the rest of the housing market will remain weak.”
Only 9% of 29- to 34-year olds qualified for a first-time mortgage between 2009 and 2011. That’s down from 17% ten years ago.
The National Association of Realtors found that people aged 25 to 34 made up 27% of all homebuyers last year, which is the lowest share in the past decade. A smaller pool of first time home buyers has an outsized impact. With no one to buy their condo or small home, current homeowners with growing families cannot move into something larger, thus impacting the entire market.
Twenty five percent of student loan borrowers who have been past due on repayment are under 30. Those between the ages of 34 and 39 comprise 34 percent of those who are late in repayment. Since a significant portion of a borrower’s total credit score is determined by payment history, borrowers who are past due are less likely to qualify for home loans.
Borrowers between the ages of thirty and thirty-nine have the highest average outstanding student loan balance, at $28,500, of any age group. In Arizona, individual borrowers would carry $989 more in loan debt if the rate hike occurs, totaling $11,074,822 in additional debt burden.
“Borrowers could otherwise use that money to establish themselves, erasing other educational debt, getting married or saving up for a home,” said Serena Unrein, Public Interest Advocate for Arizona PIRG. “Heavy student loan debt drags on the economy as a whole.”
Arizona PIRG provided a fact sheet Rising Student Debt and the U.S. Housing Market and called on members of Arizona’s Congressional delegation to pass a bipartisan bill immediately to stave off the rate hike.
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