Fed Report: Student Debt Driving Lower Millennial Homeownership Rates

About 20 percent of the decline in young adult homeownership rates — accounting for roughly 400,000 non-homeowners — can be attributed to rising student debt, according to new research published yesterday by the Federal Reserve. The report — released as part of a new article series on economic and financial topics affecting consumers — compared cohorts of individuals aged 24-32 in 2005 and in 2014.

For the 2014 cohort, real student loan debt doubled from $5,000 per capita to $10,000. The homeownership rate for the 2014 cohort fell by 8.8 percentage points, dropping from roughly 45 percent to 36 percent. Each $1,000 increase in per-capita student debt caused a 1 to 2 percentage point drop in the homeownership rate for young adults in this age cohort, the researchers found.

In a separate article on rural-to-urban migration patterns of millennials, researchers found that high student debt levels “may play an increased role” in rural “brain drain.” They found that just 52 percent of millennials from rural areas holding student debt of any amount were less likely to live in a rural area six years after beginning repayment, versus 66 percent of non-borrowers. (The higher the debt level, the greater likelihood of urban migration.)

The researchers did not determine whether the relationship with debt and migration is causal — for example, triggered by higher wages even after adjusting for cost of living in metro areas — but they did note that, three years after beginning repayment, rural student borrowers who migrated to metro areas had paid down more than twice as much debt as those who remained rural. These rural-to-urban millennials were also slightly less likely than their rural peers to have a serious delinquency and about three times as likely to have a mortgage, suggesting they had improved their capacity to carry debt.