8 States Where Student Loan Debt Makes Home Ownership Impossible

College can be expensive, but there are some states where student-loan debt can prevent you from buying a home. Our map shows the states where student loan debt is the biggest obstacle to homeownership. In these states, a typical person taking out a $25,000 student loan for four years will have to repay $38,069 in principal and interest over their lifetime.

A new analysis from Student Loan Planner by TD Ameritrade reveals that student loan debt is a serious obstacle to home ownership, and it’s not just for the well-to-do. The study looked at home ownership rates from 2005 to 2015 in the eight states with the highest average student loan debt, which range from $21,000 in Nevada to $42,000 in New Jersey (see table below).

In two states, Hawaii and California, the average person can no longer afford to buy a home at the average price even if they wanted to – regardless of student debt. Factoring in student loan debt is an even bigger hurdle for potential homeowners in today’s housing market. If $50,000 in student debt is forgiven, consumers may be more likely to overcome financial barriers to homeownership or purchase a more expensive home.

This number is large enough that any student loan forgiveness adds significant heat to an already hot housing market. Student Loan Planner® decided to find out how student loan debt affects buying a home in the United States. We found that it becomes impossible for the average person in eight states to buy a home if you include student loan debt.

8 States where student loans make it more difficult to own a home

Using average student loan debt, average income, and average home prices by state, we calculated the average monthly income in each state. Then we calculated the average mortgage payment and average student loan for each state and added them together, and divided that number by the state’s average income. The result shows the percentage of income spent each month on mortgage debt versus student loans. This number is important because lenders use it to determine if you can get a mortgage. The total amount of debt repayments divided by monthly income is called the debt-to-income ratio (DTI). Under the rules for qualified mortgages, a ratio of more than 43% can make buying a home much more difficult and will likely result in a mortgage denial. Under traditional rules, this figure should be even lower – no more than 36%.

8. Washington – 44%


7. Arizona – 44.3%


6. Colorado – 45.5%


5. Oregon – 46.5%


4. Idaho – 48%


3. Utah – 50.3%


2. California – 53.7%


1. Hawaii – 74,8%

word-image-8974 The full results by state are shown in the table below.

Buyers can spend $92,000 more to buy a home by eliminating student loans

Under the Senate Democrats’ plan to waive $50,000 in student debt, the average consumer would have their entire student debt forgiven. One of the interesting questions surrounding the elimination of student loans is how it will affect the housing market. We looked at the average percentage of student loans by state. Then we calculated how many more homes someone could buy if that money were simply added to their mortgage instead of their student loan.

We found that the average student borrower in the country can spend $92,000 more on a home without having student debt. If President Biden waived just $10,000 in student loans for every American, that would save borrowers an average of $106 a month. This allows the borrower to spend about $25,000 more to buy a home if they use a 30-year mortgage. The median price of a home in the United States is $281,370, according to Zillow.

For example, the average student could spend 10 to 30 percent more on a home if the $10,000 to $50,000 in student loans were forgiven. Given today’s limited supply, we conclude that current homeowners may benefit more from student loan forgiveness than the borrowers themselves. This is ironic, given that it is mostly older Americans, who have no student debt and own their own homes, who are opposed to reducing student loans.

In fact, this is the person who could benefit the most from moderate relief from student debt. Although housing is likely to become even less affordable than it already is. Regardless of your opinion on the relief of student debt and the housing market, it’s clear that today’s potential homeowners with student loans have a tough road ahead of them to achieve their dreams.

Extra funding for housing after remission of student debt.

Percentage of average monthly income spent on student loans and mortgage payments (by state)


Our study uses the most recent data available for all data sets. To calculate the average income, we used the 2020 Personal Income Report from the Bureau of Economic Analysis. We used the Zillow Single-Family Home Price Index for April 2021 to determine average home prices. To obtain data on average student loan debt by state, we used data from the Department of Education’s fourth quarter report. Quarter of fiscal year 2020 used.


For the average student loan repayment, we assume a 10-year loan with an interest rate of 5%. For the average mortgage payment, we assume a 30% 30-year fixed rate loan. We also used the qualified mortgage rule, which has a maximum DTI of 43%, as a threshold for this study.


Using existing data on average student loan debt, average income, and average home prices by state, we calculated the average monthly income. We then calculated the average monthly mortgage payment using current average home prices and our mortgage assumptions. Using average student loan data by state, based on our student loan assumptions, we calculated the average monthly student loan payment.

Using the state variables for average monthly income, average monthly mortgage repayment, and average monthly student loan repayment, we calculated two coefficients: the leading edge ratio and the trailing edge ratio. The initial ratio is our estimate of the percentage of income an average person in each state would spend on a mortgage payment, based on current average home prices. The statistic affected by student loans is the reverse debt ratio, which includes all debt payments in the numerator.


In Washington, for example, the median price of a single-family home in April 2021 was $505,842. On a 30-year mortgage at 3%, the mortgage payment would be $2,133 per month. The median income in Washington is $5,694 a month, according to the Bureau of Economic Analysis. Based on these data, we calculated an input ratio of 37.5%. According to the Department of Education, the average balance of student loans in Washington is $35,117.

Assuming a standard term of 10 years and an interest rate of 5%, the average student loan in Washington is $372 per month. For example, the average borrower in Washington spends 6.5 percent of their monthly income on student loan repayments. When the two are combined, the overall response rate for the average Washington resident is 44%.

For the national average student loan debt, we divided the total amount of federal student loan debt by the number of borrowers and determined that the average student loan debt on the most recent available date, September 30, 2020, was $36,510.49. This would result in a standard 10-year payment of $387 per month at 5% per year. If this payment were applied to the mortgage, an additional $92,000 could be spent on a 30-year fixed rate mortgage at 3%. Refinance your student loan and receive a bonus in 2021.

Frequently Asked Questions

How does student loan debt affect home ownership?

Home ownership has been a dream of Americans for generations, but student loan debt makes that dream difficult to achieve. According to the latest survey from the National Association of Realtors, almost one in three homeowners under the age of 35 owes money on their student loans, and they’re more likely to be younger than older homeowners. There are many things that affect home ownership, such as the cost of the house, the amount of a down payment, and how much student debt one has. In some cases, student loan debt may actually prevent a person from becoming a homeowner.

Will student loan debt keep me from buying a house?

As a rising college freshman, you likely have a lot on your mind: exams, papers, deadlines, and, of course, money. For some, the pressures of school, work, and family life will cause their academic performance to suffer and can lead to stress. For others, the financial stresses of juggling family responsibilities will pressure them to accept jobs that pay less than they’re worth. Either way, student loans are a large part of the problem. Student loan debt is a major problem for many Americans who have to deal with it as a result of going to college.

According to the College Board, the average debt for a college student in 2017 was $32,172. If you decide to go to graduate school, the average debt for a student in 2007 was $30,000. Not every college is profitable, and many colleges now look at the cost of tuition and fees, as well as the need for financial aid, to determine their success.

What states pay off student loans?

The average college graduate owes a staggering $29,400 in student loan debt, which could be as much as half of their first year of salary. But which states are the worst? And how can you pay off your student loans? The following five states offer some enticing alternatives to those who wish to avoid years of debt. If you’re wondering how much student loan debt you might owe in the future, we have the information you need.

Are you interested in knowing how much student loan debt it might take to own a home in a particular state? Or how much it might take to pay off your student loan debt in the state of New York? We have the information you need to know about student loan debt in a particular state, which can help you get a better understanding of how much debt you will have in the future.


About the Author: Prateek

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