Senator Elizabeth Warren has another selling point to bring up as she pursues the 2020 Democratic nomination for president: her proposed student debt forgiveness plan would be a boon to Millennial would-be homebuyers, according to a new study from real estate brokerage Redfin.
Millennials specifically could cut the time it takes them to save up for a down payment on a home by almost three years, from a total of 12 years to 9 years, using median home price data and salary averages from LendingTree.
“The idea of taking on a mortgage when you’re still paying off tens of thousands of dollars in student loans is a non-starter for many people,” Redfin chief economist Daryl Fairweather said in a statement.
Redfin’s analysis examined a typical potential first-time buyer earning the national average annual salary of $65,879 in the 22-44-year-old age bracket with an average of $17,938, a figure compiled by LendingTree.
If that potential buyer spends approximately $549 per month – or 10 percent of his or her income – on debt repayment at the average 5.8 percent interest rate, it would take three years to pay off the student debt.
If, after paying off that debt, that same individual began saving that same percentage of income toward a 20 percent downpayment, it would take 12.3 years to pay off student loans and save enough money for a downpayment on the national median-priced home at $308,000. Eliminating that student debt cuts those three years of payments out.
The plan would impact different metros in distinct ways. In Atlanta, for example, where recent graduates of Morehouse College had their loans eliminated as a graduation president from billionaire Robert Smith, based on local figures graduates could save for a downpayment in just 7.3 years.
In Detroit, prospective buyers without student debt could save for a downpayment in just 4.2 years. Prospective buyers in Memphis, Birmingham and New Orleans would see the biggest decrease in time needed to save for a downpayment.
“If student debt were eliminated, college grads would be able to start building wealth through homeownership, laying down roots and contributing to their communities years earlier in their lives,” Fairweather said. “An influx of young, educated homeowners could have positive impacts on neighborhoods and society at large.”
Warren announced her student debt reform plan last month, which would cancel all student debt up to $50,000 for households making less than $100,000 a year. The plan also provides debt cancellation for households making between $100,000 and $250,000 on a sliding scale.
Warren’s campaign says the debt cancellation plan would be a one-time cost of $640 billion.
Combined with her campaign’s universal free college program, the total cost would be roughly $1.25 trillion over 10 years.
Her campaign says the idea can be fully funded with her ultra-millionaire tax proposal on the 75,000 wealthiest families in the country, with fortunes of over $50 million or more.
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