Study: Student Loans Don't Hinder Mortgages

May 18, 2015

Young buyers are not being held back from obtaining a mortgage due to their student loan debt, according to a new report released from TransUnion.

Consumers between the ages of 18 and 29 with a student loan in repayment are "generally able" to qualify for new loans and, not only that, tend to perform as well or better on those new loans as similarly aged consumers without student loans, the report says. For its analysis, TransUnion researchers studied borrowers with student loans who entered repayment from three different timeframes, the fourth quarter of 2005; fourth quarter of 2009; and fourth quarter of 2012.

The report showed that in only three to six years, student loan consumers in their 20s are able to pass similarly aged consumers without a student loan in overall loan participation rates on mortgages, auto loans, and credit cards.

"Going to school impacts young consumers' access to credit; while in school, students may be less likely to have a job and generate the income necessary for loan approval," says Steve Chaouki, executive vice president and head of TransUnion’s financial services business unit. "However, most catch up once they leave school – and their ability to catch up has not changed over the past decade. Our study demonstrates that consumers in their 20s with student loans in repayment – that is, once they finish school – are in fact able to access credit at levels similar to or better than their peers who do not have student loans."

The study found that the changing economy between 2005 and 2012 did impact young consumers' access with credit, with the percentage of consumers aged 18-29 with mortgages, credit card, or auto loans dropping significantly. But the study showed that the drop impacted consumers with student loans and those without in similar ways.

"This is especially important finding, because it shows the dramatic rise in student loan balances has not materially impacted young consumers in gaining access to mortgages, auto loans, or credit cards, or in their ability to successfully manage their new credit obligations," says Charlie Wise, co-author of the study and vice president in TransUnion’s Innovative Solutions Group.

Source: "TransUnion: Student Loans Do Not Impact Housing," HousingWire (May 13, 2015)