Several barriers are hindering young people from entering the housing market. From a lack of affordable housing to rising interest rates and moderate income growth, prospective Millennial and Gen Z homebuyers have an uphill battle when it comes to reaching their homeownership dreams. Some young people also face further financial challenges due to student loan debt, which has sharply increased over the last several years. <\/p>\n\n\n\n
According to the Education Data Initiative<\/a>, the average student loan debt has increased from $18,230 in 2007 to $37,850 in 2024, marking a 108% rise. Borrowers aged 25 to 34 and 35 to 49 have the largest shares of outstanding loan debt. With 14.7 million borrowers between 25 and 34 collectively owing $485.4 billion in student loan debt and 14.4 million borrowers between 35 and 49 having a total outstanding balance of $635.7 billion, according to the U.S. Department of Education<\/a>, it\u2019s no wonder that the median age of first-time homebuyers reached an all-time high of 38 years old<\/a> in 2024. <\/p>\n\n\n\n So, how much is student loan debt holding back potential homebuyers? With the average starting salary for those with a bachelor\u2019s degree being $64,291<\/a> in 2023, Zoocasa used this figure to calculate how long it would take for a recent graduate to save for a 20% down payment on a median-priced home with and without student loan debt. Average student loan debt numbers by state were sourced from the Education Data Initiative<\/a> and were used to calculate the monthly student loan payments (based on a standard 10-year repayment period and a 6.87% interest rate). <\/p>\n\n\n\n Calculations for those with and without student loan debt assume they are saving 4.4% of their salary, the personal savings rate according to the U.S. Bureau of Economic Analysis. For those without student loan debt, we calculated how much they might save by redirecting monthly student loan payments toward their down payment to reflect how debt-free individuals have higher disposable incomes. In a high-savings scenario, 100% of the redirected student loan payment was used toward their down payment. In a moderate-savings scenario, 50% of the redirected student loan payment was used toward their down payment. In a low-savings scenario, 0% of the redirected student loan payment was used toward a down payment. <\/p>\n\n\n