Student Loan Debt Is Hamstringing NJ Homebuyers, Experts Say

NEW JERSEY — There’s a huge hurdle that’s ruining the dream of homeownership for many people in New Jersey, the nation’s largest Realtor group says: student loan debt.

Last week, policy experts with the National Association of Realtors met with educational advocates to discuss the student debt crisis in the U.S. The event touched on the findings of the NAR’s September report, “The Impact of Student Loan Debt.”

The report, put together after eight years of research, showed that student loan debt is “one of the most significant hurdles for potential buyers and their ability to purchase a home,” the NAR said.

How bad is it? In all, a whopping 51 percent of student loan holders — and 60 percent of “millennials” — said their debt delayed them from purchasing a home, researchers said.

That includes potential buyers in the Garden State, according to Jessica Lautz, vice president of demographics and behavioral insights.

“The housing market inventory [in New Jersey] is limited and it has reduced affordability for buyers, as home prices have increased,” Lautz told Patch. “Student debt makes it more difficult to save for a down payment and closing costs with rising home prices, and further erodes a buyer’s debt-to-income calculation.”

“We first started researching this topic because of NAR member’s children — they couldn’t afford a home because of the burden of student loan debt,” Lautz said. “We knew they weren’t alone because there are 40 million Americans holding student loan debt.”

“We know they want to get into homeownership, but they’re having a hard time getting there,” Lautz added.

NAR President Charlie Oppler, a Realtor from Franklin Lakes and the CEO of Prominent Properties Sotheby's International, agreed with his colleague’s assessment.

“Housing affordability is worsening, leaving future home buyers with student debt at a severe disadvantage,” Oppler said in September after the NAR report’s release.

“Younger Americans shouldn't have to choose between education and homeownership,” Oppler said. “Aside from just purchasing a home, this report finds that more than half of those with student loan debt have delayed some form of major life choice. Student loan debt isn't just seeping into housing affordability. It's also plaguing other aspects of people's lives.”

• See related article: These New Jersey Accountants Say Student Debt Is 'Financial Crisis'

But it isn’t just younger people who are struggling under the weight of their college loans, experts say.

“People think of a student loan debt holder as young person, but actually, two-thirds of borrowers are over the age of 30,” said Ben Kaufman of the Student Borrower Protection Center, who took part in last week’s NAR forum.

And the problem existed long before the coronavirus pandemic, Kaufman added.

“Even before COVID, the rate of delinquency on student loans was higher than the delinquency on mortgages at the peak of the financial crisis,” Kaufman said. “Before COVID, a borrower was defaulting on a student loan every 26 seconds.”

NAR’s research also showed that only 23 percent of student loan debtholders understood the costs of attending college before taking out loans. In addition, 35 percent of those student loan debt holders didn’t fully understand their potential for earnings following graduation.

In New Jersey, community groups, housing advocates and elected officials have been sounding the call about the rising problem of student debt for years.

According to Sen. Bob Menendez and Rep. Bill Pascrell Jr., the financial situation is grim for many in New Jersey, where an estimated 1.3 million people are trapped underneath $48.8 billion in student loan debt. With an average balance of more than $33,000, it means a $310 monthly payment — a hefty chunk of change for someone just getting out of college.

“For millions of Americans and especially people of color, crippling student loan debt has turned the dream of a college education into a financial nightmare that haunts them for decades,” Menendez said during a news conference at Montclair State University in April.

“When you're barely keeping your head above water, it's a hell of lot harder to make a dent in your student loan principal,” Menendez deadpanned.

• See related article: Push For Biden To 'Cancel Student Debt' Continues In New Jersey
• See related article: Student Loan Forgiveness Could Change Lives In NJ – Here's How
• See related article: Debt Lurks For Many Graduating NJ College Students, Advocates Say

MOVING FORWARD

So what can be done to help solve the problem? According to the NAR, here are three ways to help tackle the crushing crisis of student debt:

• “Financial education should be expanded to aid students as they face decisions about financing their education, while aid programs should be simplified.”
• “For those who hold debt, opportunities to consolidate and refinance debt at lower rates will help debtholders lower monthly debt payments, make large purchases, and make wise life choices.”
• “Finally, the NAR favors expanding tax preferences for employers who assist employees with their student debt as well as tax forgiveness for debtholders who have their debt forgiven or paid off by their employer.”

Send news tips and correction requests to eric.kiefer@patch.com

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