Young Americans can't buy a home due to high student debt

From a new research of the Federal Reserve, it appears that more and more young Americans are unable to buy a home because of excessive student debt. Since 2009, total student debt in the United States has doubled to more than $1.4 trillion, meaning that more and more young Americans are already deeply in debt before they get to the stage of their lives where they want to buy a home.

According to the Federal Reserve, 35% of the decline in home ownership in the 28-30 age group in the period 2007 and 2015 can be attributed to higher student debt. The impact of student debt is likely to be even greater among college students, according to the researchers, as nearly half of young Americans do not pursue higher education at all and thus cannot accumulate student debt.

More debt

The increase in student debt goes hand in hand with the increase in tuition fees. If the cost of college had remained at 2001 levels, there would be about 360,000 more young Americans able to buy a home than there are now, according to the U.S. central bank's research. In total, about 2.9 million Americans between the ages of 28 and 30 would own their own homes.

The Federal Reserve warns of the consequences of high student debt in the longer term, because buying a house is also the most important way to build wealth in the United States. If a large part of the new generation of students is no longer able to buy a house, this will result in a larger group of Americans building up less wealth in the future. That, in turn, could have negative consequences for the U.S. economy, which is about 70% consumption-based.

Labour market

The positive side of this story is that more Americans are now more educated. That's an advantage in an economy where the high-paying jobs are there for the taking, but that's not the case in the United States either. While there is job growth, these are predominantly part-time jobs and jobs for the less skilled. This is despite the fact that starters on the labour market need extra income to be able to pay off their student debts.

Many former students in the United States are already struggling to pay their student debts. According to the Federal Reserve, more than half of all students who completed their studies in 2009 are four months or more in arrears.

Student debt in the United States is $1.4 trillion