Extending homeownership opportunities to prospective borrowers burdened by student loan debt

Abstract

Since 2006, Student loan debt has ranked second in national consumer debt, falling second only behind household debt and exceeding debt from auto loans and credit cards (Federal Reserve Bank of New York, 2018). While there are many negative and significant outcomes related to exorbitant student loan debt that are of concern to policy makers and other stakeholders, the focus of this applied research is on access to homeownership. Few policies and programs exist which directly address this seemingly causal link between student loan debt burden and homeownership. On the federal level, a recent initiative has been implemented by Fannie Mae, one of the major insurers of conventional loans and available in every state and most localities nationwide, to directly address this issue. The Student Loan Solutions Program seeks to address barriers to mortgage loan application approval for those with significant student loan debt burden. This applied research study seeks to explore the effectiveness of this policy, providing an assessment of its capacity to meet the needs of the target population. This study seeks to explore and describe the suitability of current policy and programming in increasing access to homeownership for prospective borrowers burdened by student loan debt. Specifically, this study will explore how well current policy and programming mitigate barriers faced by prospective borrowers burdened by student loan debt in obtaining debt financing toward the purchase of a primary residential property. The results highlight salient themes related to this broad area. From the literature review and data analysis, it follows that generational effects, racial equity, credit history, and debt-to-income ratio calculations stand out most.