The proposal by Sen. Elizabeth Warren, D-Mass., to cancel a portion of student loan debt could allow millennials to save for a home down payment at least three years sooner.
The presidential hopeful’s plan would erase up to $50,000 in student loan debt per person. The median student debt balance sits at $17,938 and 24- to 44-year olds make a median income of $65,879. With the national median home price at $308,000, the typical first-time homebuyer needs over 12 years to save up for a 20% down payment, assuming they put away 10% of their income to pay off loans than stockpile for a mortgage, Redfin calculated.
The differences in ability to save grows even starker in places like Memphis, Tenn., Birmingham, Ala., and New Orleans where potential buyers would shave about four years off their down payment timeline.
As millennials make up the prime home buying age demographic, student debt keeps the share of first-time purchasers in check.
“The idea of taking on a mortgage when you’re still paying off tens of thousands of dollars in student loans is a nonstarter for many people,” Daryl Fairweather, Redfin’s chief economist, said in a press release. “If student debt were eliminated, college grads would be able to start building wealth through homeownership, laying down roots and contributing to their communities years earlier in their lives. An influx of young, educated homeowners could have positive impacts on neighborhoods and society at large.”
Housing issues will be a major focus of the 2020 presidential race and Warren released proposals for affordable housing plans and salary caps on government-sponsored enterprise chief executives.