Education vs. Asset: The Post-Grad Dilemma

It's almost graduation time and you know what that means! Final exams, graduation parties, moving back home, and finding a job within 6 months to begin paying down the average $45,000.00 price tag attached to your degree. While it sounds almost impossible, and quite frankly insane, for the 44 million college graduates now indebted to the federal government (and several private student loan lenders) it’s a stifling and dreadful reality.

If you’ve followed my blog over the past couple years, it shouldn’t come as any surprise that I am as passionate about the financial future of our students and graduates as I am of my own. And as a mortgage advisor, managing student loan debt for first time homebuyers is a routine part of my job. But what can we as real estate and mortgage professionals do to assure young graduates that by financing another huge purchase, they will be benefiting their bank account and not that of a landlord? After all, being a homeowner is a huge part of the American dream, so why shouldn’t our college graduates have a shot at finding theirs?

According to a study by American Student Assistance, 55% of student loan holders said their debt has caused them to put off home-ownership—and many would-be buyers aren't even TRYING to get pre-qualified out of fear of not staying afloat. It’s also important to understand that homeownership and student debt aren't mutually-exclusive. Meaning you can buy a home, get approved for a mortgage loan, and still make good on your student loans. And despite the justified conservativism used by Millennials in deciding where to spend (given the high levels of student debt currently stifling post-graduates), it’s important that they consider homeownership as a safe and financially savvy investment option. 

Still, many young Americans are unaware of the benefits cultivated from homeownership, such as the ability to turn housing costs into an investment, rather than an expense. And in more ways than one. Think about it:  If you manage to buy a home in an up-and-coming neighborhood for $300,000, and its value quickly climbs to $350,000, you'll have a nice little profit on your hands (which is not something that renters can claim). Owning a home can also provide an alternative source of income, for example, when rented out to peers. And a rent payment is essentially all that a mortgage payment is– a rent payment, but instead of heading straight into someone else’s pocket, it heads towards owning a larger share of your home. And when enough equity is built up, homeowners can take out home equity lines of credit to pay for expenses such as home renovations or education costs.

The next step is choosing the right mortgage professional to can help post-college home buyers understand what they can afford and how buying a home versus renting one may greatly improve their financial situation in the years to come. And as someone, like each of us, who benefits from the innovations, improvement, and success of the great, young minds of this country, I’m happy to help.