Research Report Student Loan Debt and Access to Homeownership for Borrowers of Color
Kristin Blagg, Jung Hyun Choi, Sandy Baum, Jason Cohn, Liam Reynolds, Fanny Terrones, Caitlin Young
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Research finds a weak causal relationship between student loan debt and homeownership. Still, less access to generational wealth among young Black adults is a root cause of higher student debt burden and a substantial barrier to accessing homeownership. The inability to repay debt, or to build wealth through homeownership, in turn, contributes to the persistence and widening of the racial wealth gap. In this report, we describe policy efforts to mitigate the effects of student loan debt on mortgage lending and homeownership and discuss the impact they have on closing the racial homeownership gap. These efforts include flexibility in treatment of student loan debt for mortgage lending, merging student loans into mortgage debt, and state programs to subsidize borrowers’ down payments. The current policies will have only marginal impacts on Black homeownership. To continue to lower barriers to homeownership for student loan borrowers and reduce the barriers created by student loan debt overall, we urge consideration of additional interventions. We also encourage policymakers to examine, and possibly pilot, special purpose credit programs aimed at Black student loan borrowers who are otherwise mortgage ready. Finally, we recognize that both the decline in Black homeownership and the burden of student loan debt on Black borrowers are side effects of a broader multigenerational racial wealth gap that has been influenced by both direct and indirect racial discrimination. Ambitious policies aimed at closing this gap overall, outside of the mortgage and student lending spheres, are also needed to reduce disparities within these two areas.

Research Areas Housing finance Education Economic mobility and inequality
Tags Housing affordability Housing finance reform Federal housing programs and policies Racial and ethnic disparities Racial barriers to housing Higher education
Policy Centers Center on Education Data and Policy Housing Finance Policy Center