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Americans now hold close to $1.2 trillion in outstanding student loan debt making it the second largest form of consumer debt after home mortgages. What are the implications for housing markets, household formation, and economic mobility for the next generation? Are there creative approaches to reduce the burden?

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By Stephen Banko

Like everything else in this increasingly polarized country, opinions vary about the impact of student loan debt on homeownership. But one thing is vividly clear – with the average loan debt per student hitting $33,000 this year, it can’t be a good thing for most students pining for their own place. A recent Washington Post article cited a survey conducted by FICO, one of the nation’s leading credit score companies, indicates that some 60% of risk managers at the nation’s lending institutions count debt to income (DTI) ratios. That’s terrible news for recent grads in the work force. (For more information about DTI, go to

As bad as that is for college graduates now and into the future, it is even worse news for America’s communities. Nothing stabilizes neighborhoods and cities like homeownership.  Ownership begets pride and pride shows in neighborhoods that care for and about each other. During my tenure as field office director for the Department of Housing and Urban Development (HUD) in Buffalo, NY, I saw some of that city’s most blighted neighborhoods transformed by homeownership. One particular development was a “back to the future” moment when a public housing tract that closely resembled a penal colony morphed into a pleasant, in-demand neighborhood by giving the people an opportunity to own two-family houses. Even with moderate-wage employment, the houses were made affordable by renting the adjacent unit.

That would normally be a prime opportunity for younger wage earners to become owners. Instead, saddled with $33,000 in loan debt, a spare room or basement in the parents’ home becomes a more likely scenario.

My city has five four-year colleges in the city limits. It also has a massive community college. The job market is finally starting to improve for the young people who come here to be educated but their stabilizing influence on our neighborhoods and community are a completely different story. Faced with the double whammy of high student loan debt and stagnant wages in most occupations, the dream of homeownership is too often a dream deferred.

Stephen Banko is a field office director for the U.S. Department of Housing and Urban Development (HUD)

Welcome to the BPC Housing Commission expert forum! This forum is intended to foster interactive and substantive discussion about pressing housing issues. Each month contributors from different parts of the housing sector will be invited to respond to a discussion topic. Guest posts will feature prominently on BPC’s website, as well as be shared regularly with Housing Commissioners to help inform their work.

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