As colleges continue to raise their tuition and increasing shortage of affordable housing, young adults across the US are having trouble purchases homes. According to a study conducted by the Federal Reserve, young adults aged between 24 to 32 are buying houses less due to the insurmountable burden of student loan debt (source). In fact, many recent college grads from rural areas are moving to cities for higher paying jobs that will help them pay their student loans. With hiked college tuitions, student debt is having a significant toll on the housing market and rural America.
The Federal Reserve Study
In the study conducted by economists at the Federal Reserve, research showed that homeownership among young adults from 24-32 fell to 36% in 2014. Previously, in 2005, it was at 45%. Additionally, from 2005 to 2014, college debt doubled from $5,000 to $10,000 and is still on the rise. After the financial crisis in 2008, college debt saw a major increase, with a total of $1.5 trillion in education-related loans today. Daniel Ringo and Kamila Sommer, researchers of the Federal Reserve, explain, “This finding has implications well beyond homeownership, as credit scores impact consumers’ access to and cost of nearly all kinds of credit, including auto loans and credit cards. While investing in postsecondary education continues to yield, on average, positive and substantial returns, burdensome student loan debt levels may be lessening these benefits.”
Additionally, as researchers studied student borrowers, they found the following:
- Half of rural residents with student loans still live in a rural area at least six years later, compared to the two-thirds who had not taken out loans.
- Individuals with the most debt were most likely to move out of rural areas.
- Individuals who moved to cities were more financially successful. Many were employed at higher rates with increased wages.
High Costs of Living In Urban Areas
Although urban areas have much to offer to residents, unfortunately, there are many high living costs associated with it. On the other hand, metro areas are peaking the attention of many recent graduates due to the vast job opportunities–even though they tend to be the most expensive areas in the country. Recent grads with high student loan debts are left to choose which financial venture is more opportune than the other. Now, 70% of today’s graduates are borrowing money for loans at an average of more than $25,000, and are, therefore, forced to live in the expensive urban areas due to the amount of job availability (source).
With so many young adults ranging from 24-32 primarily living in urban areas, the average age of the rural population throughout the US is rising. As student debts continue to rise, rural areas and the housing market will see a dramatic shift with lowered homeownership rates.
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