The option to buy a home, along with options on other major life decisions, could soon be a reality for Gen Zers and millennials thanks to some student debt relief.
In an article published in the Memphis Flyer in June, Amy Schaftlein of United Housing stated that people who fall in this age category are opting to stay out of the housing market, due to its highly competitive nature.
“With an overly competitive real estate market with millennials and Gen Zers not able to get in because it’s too competitive to get a home loan, many people gave up,” Schaftlein said. “Even millennials with a higher income represent a huge increase in the amount of rent applications.”
Schaftlein also mentioned that a number of things contribute to younger people not being able to qualify for loans in a timely manner, such as student loan debt.
However, with the announcement of student loan forgiveness, could this mark a shift in how millennials and Gen Zers approach life after college?
President Joe Biden recently announced that he is forgiving up to $20,000 of federal student loan debt. Those who received Pell Grant will have up to $20K forgiven, while other borrowers can have up to $10K forgiven. According to a fact sheet by the White House, this relief is only available if the borrower has an individual income of less than $125K, { “250K for married couples.”}
Alanna Spears is currently a senior at the University of Memphis studying biology. When the Biden administration made the announcement, Spears, like many others, shared her excitement on social media, and how this will positively impact her future moving forward.
“I want to buy a house one day, and student loans are looked at in debt to income ratio when applying for mortgages,” Spears said. “Even if only half of my debt is cancelled, that significantly lowers my debt to income ratio, which could be a determining factor in if I get a house or not. With rising housing costs, my fiancé and I want to buy a house in the next few years and debt cancellation has made that dream a possible reality for us.”
Redfin reports that the median selling price for a home in Memphis is $188K. The U.S. Census stated that as of July 1, 2021, the median household income is $41,864.
Spears said that she and her fiancé are now able to plan for the future, and realistically save and plan for their goals.
According to the White House, 43 million borrowers will benefit from student loan relief. The White House also estimates that at least 20 million people will have their total debt canceled.
Information compled by the the Education Data Initiative reports that more than 862,000 people in Tennessee have student loan debt, and that the average borrower has about $36,418 in debt. State residents have a total of $31.4 billion in student loan debt.The site also states that 51.8% of borrowers are under the age of 35.
As a result of this announcement, the Biden administration extended the student loan repayment pause through December 2022, with repayments expected to resume in January.