VARbuzz: Student loan rate set to double — and that’s bad for housing
One of the issues facing the housing market in the next few years will be, oddly enough, student loans. With the cost of education rising, a lot of 20- and 30-somethings are spending a good chunk of their income paying them off. That’s one reason many may not buy a home as quickly as they might have a few years ago.
As Bloomberg put it in “‘Explosion in Student Debt’ Drags Down Housing“:
As the cost of attending U.S. colleges and universities surges, student-loan debt is turning into “a significant drag on the housing market,” according to Pierre Lapointe, a Brockhouse & Cooper Inc. strategist.
[...] tuition expense has risen about three times as fast as wages since 2001 before accounting for inflation, according to data from the Labor Department.
Congress isn’t helping much. The interest rate on government-subsidized student loans is set to double on July 1, meaning those loans are going to be even more of a drag on the housing economy.
Congress could freeze the interest rate, but it won’t. Today the process hit yet another wall: a Republican filibuster preventing a freeze on the interest rate. The issue: The parties can’t agree on how to pay to keep interest rates down. (Republicans want to cut funding for health care; Democrats want to cut subsidies to oil companies.)
The end result is as expected: Both sides pointing fingers and accusing the other of playing politics, each saying they’re the only ones who really want to help. Yada yada yada. Gridlock.
Which would be yet another reason to roll our collective eyes at Congress, except that this is an issue that is already affecting the real estate market.
So here’s hoping those folks in D.C. can get their act together.