College loan debt is a barrier to home ownership

In recent years, the Albany metro area has been named a top destination for millennials, earning top spots on several “best” lists, joining the Capital Region with cities like Charlotte, Denver, Pittsburgh and Saint -Louis. But with the claim of being a vibrant, affordable and commuter-friendly place to live, there are some fine print – that many college graduates live with enough student debt to make permanent residence in the capital look like to a chimera.

Heather Thompson, 25, of Saratoga Springs, owes about $89,000 in college debt, putting her well above the state average of $37,708 per borrower. Total student loan debt in New York today stands at $99.8 billion, according to a recent survey by the National Association of Realtors.

“When I first graduated from college, I had no idea how high my payouts were going to be,” said Thompson, who earned a bachelor’s degree in health science from Russell Sage College in 2018. I started paying $1,000 a month, and I refinanced my loans twice to lower the interest rate and repayments.

Thompson’s monthly refinanced loan payment is more than $600, double the Albany average, according to the NAR poll. That’s more each month than his share of the rent. Thompson and her boyfriend, Jordan Turner, share an apartment and recently adopted a dog. They would like to expand their living space, but because of Thompson’s debt, they don’t see how to make it happen.

“The idea of ​​being a landlord is far from my financial situation,” said Thompson, who juggles several part-time jobs. She is a nanny, social media manager and model. “I don’t have much of a savings account once I take care of my bills and use what I can to medicate myself or just live my life. My stepdad recently co-signed another loan so I can rent a car.”

Thompson says there are advantages to renting within walking distance of downtown Saratoga Springs, where the median list price for a single-family home in December 2021 was $619,000. Instead of a private outdoor space for their pup, the couple roams local parks, restaurants and attractions. Thompson felt less pressure moving into her boyfriend’s apartment, foregoing serious credit checks or an income check more commonly associated with the mortgage application process.

“It can be very difficult for buyers with student debt to apply for a mortgage,” said Mell Meus, mortgage loan officer at Fairway Independent Mortgage Corp. “Lenders are required to include a percentage of the total student loan balance in the debt-to-income ratio – which ultimately reduces the amount of funds a person can borrow.

The median selling price of a home in the United States was just $400,000 in the fourth quarter of 2021, according to the St. Louis Federal Reserve. In the Capital Region, an October sale price report from the Greater Capital Association of Realtors said the median sale price for a single-family home was $256,000.

Meus said a potential buyer with high student debt should work to minimize debt in other areas, such as credit cards or car loans, and also be open to buying a unit. multifamily to ultimately reduce the cost of a future mortgage.

“We are able to use 75% of the potential rental income from the non-occupying unit to qualify for a mortgage, which translates to more income to offset student loan debt,” Meus said.

If Thompson and her boyfriend were considering buying a home in the short term, it would likely require them to move to a city more affordable for first-time buyers in the Capital Region. They also considered moving to Florida for a better cost of living, but said they have family in the Albany area who help them settle here.

“Hopefully in the next two years we can save up to split a down payment between the two of us,” Thompson said. “I’m hopeful, but I’m not looking forward to paying off the rest of my student debt over the next 15 years.”

Like many other millennials who make up nearly 13% of the local population, Thompson is in the same position now that Ali and Josh Lupo found themselves after graduating from state universities in 2013 with combined student debt. of $100,000.

“Our initial mindset after graduating (with so much debt) was that we weren’t alone, and it didn’t matter if it took us a few decades to pay it off,” Ali Lupo said. , who now goes by “The Fi Couple” on Instagram with her husband. “It wasn’t until we started planning and budgeting for our wedding in 2018 that we took a hard look at our finances.”

The couple quickly realized that they were spending as much each month as they were earning, and that their student loan repayments totaled the cost of a mortgage.

“Our debt was a huge barrier to buying a home, starting a family, saving for retirement, or transitioning into less stressful careers,” Ali Lupo said. “We knew we had to get rid of this debt to change our lives. And no one was going to come and save us.

The Lupos invested in real estate as a potential way to earn extra income and learn about saving and spending.

“We skipped our honeymoon, recouped every dollar we had, and bought a 120-year-old duplex,” Josh Lupo said. Renting one of the units has reduced the couple’s cost of living and paid more than half of the mortgage payment, allowing them to gradually increase their income and apply the remaining money to their debt. ‘studies.

Today, the Lupos have two investment properties in Rensselaer County and are debt-free, having settled their $100,000 student loan debt in three years. They post tips and tricks on Instagram on how to use real estate as a wealth-building tool. They have over 85,000 subscribers.

“We made a bunch of financial mistakes, had a ton of debt and had very average incomes with no experience in real estate,” Ali Lupo said. “And despite all that, we were still able to invest in real estate and pay off our student debt in just three years.”

Their goal is to normalize conversations about debt, personal finance and investing for the average millennial, and let people know that the path they’ve taken in real estate isn’t just for do-it-yourselfers or to those who are already rich.

“We knew we couldn’t afford our dream home or anything, but rather than continue to feel hopeless and frustrated with our debt, we took ownership and responsibility for it.”

60: The percentage of non-homeowner millennials who say student loan debt is delaying their ability to buy a home, according to a survey by the National Association of Realtors.

12.7: Percentage of Albany’s population made up of millennials. In 2021, there was an estimated population of 132,100 people between the ages of 20 and 34

$99.8 billion: student loan debt in New York

$38,708: Average student loan balance in Albany (making it one of the highest average balances in the state)

$327: The Average Monthly Student Loan Payment in Albany

The Lupos learned about real estate investing from online communities, books and podcasts. After paying off their debt, they also eliminated monthly housing costs and are on track to retire in their 30s.

“If home ownership is a goal, we recommend talking to a mortgage lender and getting all the facts about your debt ratio and the impact of your student loans on your ability to buy a home” , said Josh Lupo. “It’s been a tough journey and we’ve made a lot of sacrifices, but every choice we’ve made has brought us closer to our ultimate dream of being able to spend more time doing what we love with the people who matter most.”

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