SEATTLE, Sept. 18 (UPI) -- Student loan debt is not stopping young professionals from homeownership, a new study by Zillow suggests, bucking the conventional wisdom that the debt is hindering millennials from becoming first-time home buyers.
The Zillow report found as long as a four-year degree or higher is completed, "the effect of student debt on their chances of owning a home is negligible." Instead, there's a 70 percent chance that graduates with a medical, law or doctoral degree will own a home, the study found.
The study, which draws on 2013 data of thousands of household since the 1960s, found that while student loans do negatively impact a borrower's probability of owning a home, the impact is much smaller than previously thought. The impact of student loans on home ownership is greater for people who have debt but don't finish a degree or have an associate's degree compared to those who obtain a bachelor's degree or higher.
"Certainly, it's better to accumulate debt and finish your degree than it is to accumulate debt but have nothing to show for it in the end," Zillow's chief economist, Svenja Gudell, said. "In other words, if eventually owning a home is a priority for you, and you're currently pursuing higher education: Don't be a fool, stay in school."
The new research comes as the nation struggles for answers about handling the $1.2 trillion in outstanding student debt and the growing difficulty some 40 million Americans are having to pay down loans. The general consensus is graduates with outstanding student loans aren't buying homes because they don't have enough money for down payments, encounter debt-to-income restraints when applying for loans or face credit problems if they miss payments or default.
Zillow, an online real estate database company, said its study proves there are holes in those scenarios.
The company predicted households with $50,000 in student loan debt and no college degree are 15 percent less likely to own a home than those with no degree and no debt. There was a 16 percent drop for households with an associate's degree when comparing those with no debt and those with $50,000 in loans.
The difference is less stark for holders of higher degrees -- 70 percent of households with bachelor's degrees and no debt are likely to own homes, compared to 66 percent for those with $50,000 in debt. The likelihood of owning a home drops 5 percentage points for those with master's degrees and 3 percentage points for those with doctorates when comparing households with zero debt and $50,000 in debt.
"Finishing with a bachelor's degree or higher actually tends to insulate borrowers from being adversely affected by student loan debt when it comes time to buy," Zillow said.
The Zillow study used information from the University of Michigan's biannual Panel Study of Income Dynamics, looking at families and individuals age 22 to 40.
