AL and FL Mortgage News

Student Loans and Homeownership

January 24th, 2022 10:43 AM by Devin Murray

If you or your child are looking at colleges and universities in the near future or are enrolled now, student loans maybe be part of the equation.  Yes a degree significantly increases future income potential and financial stability over not having one and know we are big proponents of education.  As mentioned throughout previous posts owning a home also plays a massive role in building financial security and net worth dozens of times greater than those who rent.  There are smart ways to accomplish affording a good education and owning a home but the growing cost of education is fueling larger and larger student debt when impacts the latter.  Many do not understand that student debt negatively impacts how much house you can afford and in many cases prevents others from buying after graduation.  On statistic published by Bloomberg in MPA just days ago mentions 24% decline in homeownership among student borrowers aged 18-35 from 2009-2019.  In handling student loan debt and financing homes I hope to provide the basis for a different way of thinking for both parents and students.

A high school diploma does not stipulate that an 18 year old can financially provide for themselves in any way.  We can blame teachers and educators OR we could take on a greater responsibility.  I believe that if parents encouraged and maybe required their kids to first learn a trade before enrolling in a college or university we would immediately she a paradigm shift.  To quote Mike Rowe in a recent interview concerning jobs in 2022, for every five tradespeople that are retiring only two are replacing these jobs so the supply is decreasing meaning the demand by employers is extremely high.  Ideally students can spend time attending county or state community colleges to learn skills within a trade, get certified, and immediately have a way to feed themselves before they decide to leave the nest.   Trades are the single fastest way to immediately increase earning potential before they leave home and before they have the chance to incur any student debt.  (Examples are cosmetology, HVAC, electrician, plumbing, just to name a few.)  For others the military is a similar path to learn a trade (and yes life skills too) and I would agree far better for some.  If you want more information, Mike Rowe's Foundation trades is a very good starting point.   

The time it takes to get trade certifications is not 4 or even 2 years.  Since demand from employers is so high, being enrolled in one of these programs and being serious about work and earning money will easily land you a job making $15-18/hr.  By starting work first, students can get a taste of earning, spending, building credit, and the value of money before agreeing to incurring any student debt.  It enables students to get much needed job experience, explore opportunities in that field even if they don’t plan to continue long term and it would give them a way to pay for school day one.  Working in a trade field coupled with paying for classes while attending undoubtedly creates more skin in the game and students tend to learn more in that class, thereby improving the product itself.  As a society we must eliminate the stigma that is “blue-collar” jobs because you can earn far more money compared to many white-collar jobs.  Also having a trade and earning income and paying for school while in school versus incurring/deferring large sums of debt is a far better long term plan.   Being a slave to long term debt for a decade or more will pale in comparison to what kind of college experience you think you might have had. 

When you compare mortgages and student loans, the mortgage industry forces us to prove ATR which is your ability to repay your loan and I think this is a smart protection for our industry and the economy.  Colleges and universities have been increasing their tuition costs annually by double percentage points year over year and a student of any major can basically finance tuition, room, board, et. regardless of their declared major.  This means that a social worker who might earn $35,000 a year can finance $120,000+ and likely never be able to pay off their loan without some for of additional assistance like a second job/income or a spouse’s income.   This means student loans are granted to many knowing many will likely never repay in full and the government will still allow you to borrow.  There are many statistics which show a shrinking median income among student debtors and an increasing number of students borrowing each semester so it is my daily work experience that we have a bubble approaching fastly approaching $2 trillion that isn’t about homes or real estate.  

What if we started all of this early in high school and taught a course that echoes this?  If so maybe Chapter Three would be called “How To Shop for an Education.”  The underlying theme would be taking the same classes but earning the same credit at institutions across the street from big universities.  The vocabulary would begin with defining cost per credit hour and dual enrollment.  The day one homework assignment would be to find just how many classes you can take elsewhere nearby but still earn credit at the state school.  This would illustrate that bargains exist in education where you can offset the crazy high cost in pursuit of a degree.

I will close in saying, don’t believe the lie that you have finance the large burden of your education or that of your child(ren).  Your kids are crazy smart and unlike any other time in history, you can empower them in a short window of time to make better life decisions, incur less debt, and build equal or greater financial security faster and in a far less painful way.   You owe it to yourself and your kids to explore some for your sake, theirs, and future generations.  

Note: If you already have student loan debt and want to buy a home, do not be discouraged or feel as if it is too late for you.  We help people who owe on student loans almost every single day.   If you want to stop renting we can help you develop a plan on how to get there 100% for free, no strings attached.  Reach out to us today.




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