Congress’ failure to act on extending discounts to student loan rates could have a negative impact on the housing market.
After failing to address the rising rate issue this week, Congress is expected to miss the July 1 deadline to extend the discount preventing new student loan rates from doubling from 3.4% to 6.8%. The issue could be resolved later in July, following the July 4th recess, but it raises question of student loan affordability and an overall economic recovery.
For the roughly $1trn of outstanding student loan debt at the end of 2012, borrowers are paying roughly $43.5bn on their student loans every year, according to a report by The Progressive Policy Institute. This could translate into about 155,000 homes, a report by Think Progress said
There are approximately 20m Americans that attend college each year, and 60% - or 12 million - borrow for college, according to the Chronicle of Higher Education. Federal Reserve figures show there are approximately 37 million borrowers, with an average of $24,301 oustanding per borrower, as of Q12012.
Around 14% of the 37m borrowers are already struggling with payments, with at least one payment past due, according to American Student Assistance.
And large balances of looming student debt could hamper younger people from buying a home. The 2012 Annual Profile of Home Buyers and Sellers by the National Association of Realtors has already reflected that, on average, homebuyers were 42 years old, up from 39 years old in 2010.