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College graduates today have twice the debt of those a decade ago, and many young people are denied a once common rite of passage: buying a home. Two-thirds of college graduates leave with an average of $25,000 in loans, according to a report by younginvincibles.org. That makes the debtor ineligible for the typical home mortgage.
The effect is devastating to the U.S. economy, according to the report:
“Debtors who graduated in 2004 and start looking for a mortgage to purchase a home in the next year – the average age for home purchases is 30 – will face some difficult realities.The impact of these limitations will be significant. Home purchases create jobs and spur economic growth. Cutting out a cohort of graduates who previously participated in this market will add another drag to an economy only just emerging from the Great Recession.”
The group says that there are limited programs available for student loan debtors looking to get out of the hole, such as entering an income-based repayment program. But it’s really up to the government to aid the young people:
“Policymakers who may be unmotivated by individual struggles of borrowers, or unconvinced of the extent of the problem today, would be wise to begin to view student debt in an additional light: as an encumbrance on the recovery of the housing market, and as a result, a potential hindrance to economic growth. Broad reforms that bring down the rising cost of college, better educate high-debt borrowers, keep interest rates and repayment options manageable, and ensure that students get a quality education that bring a strong return on their investment, are all goals unto themselves, but will also go a long way to ensuring that these borrowers have a chance to enter the housing market and fuel economic growth.”
Read the full report here.