A new study from the Federal Reserve brings more evidence to the table on the damaging economic effects of high student debt burdens
We’re written in the past about the effects of student loan debt on the housing market – in 2014, for instance, it’s estimated that student debt cost the market more than 400,000 home sales – but a new report from the Federal Reserve has perhaps offered the clearest sign yet of how student debt negatively impacts housing.
In short, we now have math on our side. Using a series of computations, the Fed found that for every $10,000 increase in student debt per graduate, the share of 25-year-olds living with their parents rises by 2.9 percent, as Millennials opt to stay home and save money.
Millennials Living at Home – a Stunning Rise
Extending its analysis to 48 states, the Fed uncovered a stunning statistic: in 2003, there were 25 states where 20 to 30 percent of 25-year-olds lived with their parents; by 2013, though, all 48 states had such rates of Millennials living at home, and for 12 states, the “parental co-residence rate,” as the Fed calls it, had exceeded 50 percent.
Here are two amazing charts from the Fed that show the trend:
The Kids are (Not) Alright
So, where does this leave us? In short, it means that the long-term trends for housing still have considerable weeds to wade through, pending any unforeseen economic juggernauts that benefit Millennials. And as The Wall Street Journal highlighted in a recent article, the Fed’s study sits comfortably next to similar research on student debt. According to a study by Edvisors, a college graduate in 2014 completed college with an average student debt burden of $33,000, which is double of what it was in 1993.
Finally, 25-year-olds are hardly the only ones living at home and buying fewer homes; as our graph below demonstrates (recreated from Fed data), 30-year-olds are stuck in the same rut, as double-digit home price increases have pushed many housing markets out of reach for Millennials: