Student debt has prevented hundreds of thousands of millennials from buying homes, Fed says

  • Student debt has risen to $1.5 trillion, surpassing loans for cars and credit cards.
  • That has led to fewer young Americans buying homes, according to a new Federal Reserve report.
  • Loans have reduced individuals' ability to afford a down payment and to secure mortgages.

Mounting student debt has weighed on homeownership among young Americans, Federal Reserve economists said in a new report.

Homeownership among those ages 24 to 32 fell to 36% from 45% between 2005 and 2014, according to the report. While student loans were not the main factors influencing the housing market, the Fed said that about a fifth of the decline was directly linked to student loans. Pew Research defines a millennial as someone born between 1981 and 1996, meaning they are currently between the ages of 23 and 38.

About 400,000 borrowers would have owned a home if it weren't for climbing debt, researchers Alvaro Mezza, Daniel Ringo, and Kamila Sommer estimated, as high levels of student loans reduced individuals' ability to qualify for mortgages and to save for a down payment.

"We found that a $1,000 increase in student loan debt causes a 1 to 2 percentage point drop in the homeownership rate for student loan borrowers during their late 20s and early 30s," the researchers said.

RELATED: Take a look at the top celebs homes to hit the market in 2018:

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Top celeb homes to hit the market in 2018
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Top celeb homes to hit the market in 2018

Elin Nordegren

Tiger Woods' ex-wife Elin Nordegren, who was married to the pro golfer for six years, has placed her 11-bedroom Florida mansion on the market for $49.5 million

Check out the mega-mansion here.

(Photo by Frazer Harrison/Getty Images for Churchill Downs)

Kylie Jenner

The ultra-famous reality TV personality sold the smaller of her two spacious homes in Hidden Hills, Calif., in an off-market deal for $6.7 million in Sept.

Check out her spare home here.

(Photo by Evan Agostini/Invision/AP)

Shakira

The mononymic cross-cultural music industry global phenom put her freshly refreshed, contemporary mansion on Miami Beach’s prestigious North Bay Road up for grabs at $11.648 million in June.

Check out the beach mansion here.

(Photo by Greg Allen/Invision/AP)

Selena Gomez

The singer and actress put her sprawling six-bedroom Fort Worth, Texas home back on the market earlier this year for close to $3 million.

Check our the home here.

(Photo by Richard Shotwell/Invision/AP)

Leonardo DiCaprio

An unassuming, Spanish-style residence in the ever-more expensive, boho-chic hills above L.A’s Silver Lake Reservoir, owned via trust by Tinseltown A-lister Leonardo DiCaprio and long occupied by a family member, hit the market at $1.749 million in October. 

Check out the residence here.

(Photo by Eric Jamison/Invision/AP)

Eva Longoria

The star was asking $3.795 million earlier this year for her longtime mansion in the historic Hollywood Dell neighborhood that winds through the foothills between Hollywood and the Hollywood Reservoir.

Check out the beautiful residence here.

(Faye Sadou/MediaPunch /IPX)

Rihanna

Just over six months after her Los Angeles residence was busted into by an intruder/stalker, the superstar singer unsurprisingly hoisted the property near the base of Nichols Canyon up for sale at $7.495 million earlier this month.

Check out the luxurious home here.

(Photo by Evan Agostini/Invision/AP)

Kenny Rogers

The country music icon reportedly sold his opulent mansion in the leafy northern suburbs of Atlanta for not quite $2.4 million.

Check out the estate here

(AP Photo/Mark Humphrey)

Jeremy Piven 

The actor engaged the services of a new, high-profile real estate agent in July and re-listed his beachfront residence in Malibu, Calif., with a once-again reduced price of $8.5 million.

Check out the oceans views here.

(Photo by Chris Pizzello/Invision/AP)

Ellen Pompeo

One of the highest-paid actors on television, with a $20 million annual contract for her long-running role on “Grey’s Anatomy,” sold a 1920s Spanish villa positioned high on an elevated double lot in the historic Whitley Heights neighborhood in the foothills above Hollywood for a tad less than $2.8 million in July.

Check out the breath-taking residence here.

(Photo by Morgan Lieberman/FilmMagic)

Hayden Panettiere

The actress put her gorgeous 5,000-square-foot Nashville home on the market for $1.65 million in August.

Check out her country home here.

(Photo by Evan Agostini/Invision/AP)

Kal Penn

The politically engaged actor, best known as Kumar in the hilariously low-brow “Harold & Kumar” comedy film franchise, put a mid-century contemporary on a slim cul-de-sac in a particularly celeb-packed pocket of the Hollywood Hills up for sale at a touch under $1.5 million in late August.

Check out the beautiful home here.

(Photo by Noam Galai/Getty Images for Global Citizen)

Demi Lovato

The 26-year-old singer put her L.A. mansion that she was rushed to the hospital from after overdosing on the market in Sept. The HollywoHillslls abode, which she purchased for $8.3 million in September 2016, is up for sale for $9.495 million. 

Check out the mansion here.

( Photo by Pedro Fiúza/NurPhoto via Getty Images)

Frances Bean Cobain

The low-profile but card-carrying member of the rock ’n’ roll aristocracy sold a vintage Spanish bungalow nestled into a quiet cul-de-sac in the foothills above Hollywood for a bit more than $2.3 million in October.

Check out the residence here.

(Photo by Evan Agostini/Invision/AP)

Producer Blake Masters

Blake Masters, the creator of the crime drama "Brotherhood," listed a four-story, mullet-style residence in the hills between L.A.’s Beachwood and Bronson canyons for just under $2.2 million in January.

Check out the residence here.

(Photo by Richard Shotwell/Invision/AP)

Kristen Wiig

Having recently completed a carefully considered, comprehensive and no doubt exceedingly costly restoration, update and addition of a swimming pool and guesthouse, the comedian listed an architecturally significant hillside home in the Silver Lake area of Los Angeles with a dead serious asking price of $5.125 million in October. 

Check out the newly updated mansion here.

(Photo by Chris Pizzello/Invision/AP, File)

Whoopi Goldberg

The actress and talk show host cut her West Coast real estate ties in early 2018, listing her longtime residence in the posh, sea breeze licked Pacific Palisades area of Los Angeles with an asking price of $8.795 million. 

Check out the residence here.

(AP Photo/Dan Steinberg)

James Woods

The veteran actor listed an architecturally pedigreed mid-century modern residence high in the Hollywood Hills for $2.65 million in early 2018.

Check the Hollywood home out here.

(Photo by J. Countess/WireImage)

Anna Faris

The comedian and actress listed one of the two homes she owns in the leafy, lower Nichols Canyon area of L.A.’s Hollywood Hills for $2.5 million in early 2018.

Check out the stunning home here.

(Photo by Carlos Tischler/Getty Images)

Jennie Garth

Fast on the heels of reports that the actress, one of the stars of the cult favorite 1990s series “Beverly Hills, 90210,” and third husband, Dave Abrams, are headed for divorce court, she’s unsurprisingly listed her custom-renovated residence in L.A.’s less-renowned but still keenly sought-after 91604 zip code in July with an asking price pushing up on $4.5 million. 

Check out the stunning views from the home here.

(Photo by Joshua Blanchard/FilmMagic)

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Outstanding student-loan balances have more than doubled to $1.5 trillion over the past decade, outpacing levels of those for vehicles and credit cards.

A recent POLITICO/Harvard T.H. Chan School of Public Health poll found that the majority of Americans, both Republicans and Democrats, saw lessening student debt as an "extremely important" goal for Congress. Among a list of priorities, 79% listed cutting student debt as the most important.

"While investing in postsecondary education continues to yield, on average, positive and substantial returns, burdensome student loan debt levels may be lessening these benefits," the researchers said. "As policymakers evaluate ways to aid student borrowers, they may wish to consider policies that reduce the cost of tuition."

The researchers suggested increasing state government investment in public institutions and easing the burden of student loan payments, such as through use of income-driven repayment.

"The study provides a nice run-down of policy implications," said Josh Wright, an economist at iCIMS. "To support homeownership, our government could look into: debt forgiveness programs, slowing the growth of tuition, and mortgage delinquency prevention programs." 

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