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Home Ownership Questions and the Need of a College Education

As educational costs have been rising, well ahead of the rate of inflation in recent years the whole question of the value of qualifications has come under the microscope. Is it really worth carrying student loan debt into your 20s as you begin your career with so many calls on your pay check? Many people leaving college move to new cities to begin those careers so there are immediately accommodation issues and it may not be too long with marriage and a family on the way that the question of investing in real estate arises.

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Debt and the Real Estate Market

The collective USA Debt on student loans is $1.2 trillion, a figure that is extremely difficult to comprehend. The top 10% owe $100,000 and it is no easy task to clear that level of debt even though the terms and conditions of such loans are fairly flexible. If you add the average level of credit card debt into the equation, over $15,000 on those not clearing their balances in full each months, it is no wonder that the real estate market is apparently being damaged because young people struggle to get to a position where they can buy their first piece of property. Credit card balances can be paid off with a cheaper personal loan but large student loan debt is much more difficult to clear.

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There is a counter to the argument that student debt is harming the real estate market however. The Board of Governors of the Federal Reserve System suggests that graduates are actually more likely to get into the real estate market than non-graduates because their income prospects improve. There are often different viewpoints amongst economists of course. Real estate sales in 2014 were over 400,000 below the previous level and that was attributed to the overall level of debt in society with student loan debt amongst the young a major part.

The Federal Reserve Bank of New York said that homeownership post-recession fell by far more amongst the young with student debt than among other sectors. That had not been the case historically. The Governors looked more closely at this and disagreed with its conclusions after gathering credit report data and separating those with no debt, graduate or not. There was certainly evidence that those without debt appeared to enter the real estate market but it didn’t seem that college education was any sort of limiting factor.  Indeed the largest gap in home ownership was between those who had graduated and those who had left after high school. Within a little over a decade from graduating those who had obtained better jobs because of their education were more likely to own real estate than non-graduates.

It is far more likely that those who fail in college education and leave mid-course are still renting than those who graduated. Yes, in their case student loans may have been an obstacle because their careers have not gone as well. They will commonly have much lower paid jobs and therefore greater financial problems.

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Control and Credit Score

Controlling debt usually involves lifestyle changes. If you have to use your credit card to help you get through the month then you are overspending. Up to a point your credit card can disguise your problems if all you do at the end of the month is to pay the minimum the credit card company requires in order for you to comply with its terms and conditions. Until you reach your credit limit, can’t get an increase and then fail to make the appropriate payments there will be no debt collectors chasing you.

Unfortunately your chances of getting into the real estate market are partly dependent upon your credit score that is a reflection of your history. That changes with each entry, good or bad. It is a slow process to improve a score and carrying credit card debt certainly does not help. Whatever your educational standard you should think about your finances, good or bad and get them in order if you want to be able to obtain a mortgage. The recession caused serious problems in the real estate market; in some areas those problems still remain. However real estate investment in the medium to long term makes good sense and if a college education helps get you on the first step then the price is worth paying.

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