The Effect of Educational Debt on the Probability of Homeownership for College Graduates: An Empirical Analysis
With the average tuition of both public and private institutions on the rise, students are graduating from college with a higher burden of debt than ever before. In turn this is adversely affecting their post-graduation decisions, specifically the purchasing of their first home. With the simultaneous increase of educational debt levels and tightening of lending constraints for mortgages, it is hypothesized that first-time homeownership is being delayed. The purpose of this study is to analyze what exactly is delaying graduates from purchasing a home, the outstanding total educational debt amount or the monthly educational debt repayment amounts. Both can hinder the requirements necessary to sign a mortgage, as potential homebuyers look to bypass the down payment and monthly mortgage payment constraints. Literature exists that looks into the increasing burden of educational debt on graduates and separate literature that looks into the future trends of homeownership in America, but the goal of this paper is link these studies providing an empirical analysis of the effect college debt has on homeownership rates. Studies suggest that educational debt is becoming a significant variable in the decision to buy a home. Through the development of an empirical model the trends in homeownership rates relevant to homebuilders, prospective students, college graduates, and families will be properly exposed.