A typical aspiring first-time homebuyer could save a down payment three years faster under Senator Elizabeth Warren's plan to cancel up to $50,000 of student loan debt per person, according to a new analysis of student loan and home price data from Redfin (www.redfin.com), the tech-powered real estate brokerage.
The Redfin analysis looked at a typical potential first-time homebuyer earning the national average salary of $65,879 for the Census Bureau's 24-44 year old age bracket, with an average of $17,938 in student debt, based on data from Lending Tree. If said potential homebuyer spent 10 percent of her income ($549 per month) on debt repayment at the average 5.8 percent interest rate, it would take 3 years to pay off the student debt. If after paying off her student debt she started saving that 10 percent of her income toward a 20 percent down payment on the national median-priced home ($308,000), it would take a total of 12.3 years to both pay off her student loans and save enough money for the full 20 percent down payment ($61,600), assuming home price and income did not change. Under Sen. Warren's plan to cancel up to $50,000 in student loan debt, the time it would take to save for a down payment would shrink to 9.4 years.
Nearly 400 graduating seniors at Morehouse College in Atlanta recently had their student loans eliminated as part of a massive graduation gift from billionaire Robert F. Smith. This gift of debt forgiveness could get them into their own home 3.7 years faster than if they'd retained that debt. Based on estimates of $31,833 in average debt per Morehousegraduate and Atlanta's median income of $66,357 for 24-44 year olds, the graduates could save for a down payment on a median-priced Atlanta home in just 7.3 years, compared to 12.9 years if they had to pay off their student loans on their own before saving for a downpayment.
"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," said Redfin chief economist Daryl Fairweather. "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. An influx of young, educated homeowners could have positive impacts on neighborhoods and society at large. "
| Metro Area | Median Remaining Student Debt Balance | Median Annual Income of 24-44 year-olds | Median Home Price | Years to Pay Off Student Debt, Then Save 10% of Income Toward a Down Payment | Years to Save Down Payment Without Student Debt | Time to Homeownership Saved (Years) if Student Debt were Eliminated |
| Atlanta, GA | $22,232 | $66,357 | $241K | 11 | 7.3 | 3.7 |
| Austin, TX | $17,963 | $76,969 | $305K | 10.4 | 7.9 | 2.5 |
| Baltimore, MD | $19,854 | $85,562 | $255K | 8.5 | 6 | 2.5 |
| Birmingham, AL | $20,679 | $57,502 | $203K | 11.1 | 7.1 | 4 |
| Boston, MA | $17,869 | $97,871 | $472K | 11.6 | 9.6 | 1.9 |
| Charlotte, NC | $19,385 | $66,867 | $245K | 10.5 | 7.3 | 3.2 |
| Chicago, IL | $19,307 | $73,392 | $240K | 9.4 | 6.5 | 2.9 |
| Cincinnati, OH | $18,704 | $68,511 | $177K | 8.1 | 5.2 | 3 |
| Cleveland, OH | $18,743 | $56,161 | $145K | 8.9 | 5.2 | 3.7 |
| Columbus, OH | $19,125 | $71,181 | $200K | 8.5 | 5.6 | 2.9 |
| Dallas, TX | $18,257 | $70,064 | $295K | 11.3 | 8.4 | 2.8 |
| Denver, CO | $20,180 | $81,787 | $409K | 12.7 | 10 | 2.7 |
| Detroit, MI | $18,552 | $62,628 | $130K | 7.4 | 4.2 | 3.3 |
| Hartford, CT | $16,948 | $76,235 | $205K | 7.8 | 5.4 | 2.4 |
| Houston, TX | $18,524 | $64,590 | $240K | 10.6 | 7.4 | 3.1 |
| Indianapolis, IN | $19,065 | $62,054 | $180K | 9.2 | 5.8 | 3.4 |
| Jacksonville, FL | $18,390 | $62,115 | $226K | 10.5 | 7.3 | 3.3 |
| Kansas City, MO | $18,854 | $71,313 | $215K | 8.9 | 6 | 2.9 |
| Las Vegas, NV | $16,184 | $60,460 | $280K | 12.2 | 9.3 | 2.9 |
| Los Angeles, CA | $17,265 | $72,654 | $620K | 19.6 | 17.1 | 2.6 |
| Louisville, KY | $17,372 | $61,088 | $180K | 9 | 5.9 | 3.1 |
| Memphis, TN | $18,866 | $49,834 | $165K | 10.9 | 6.6 | 4.3 |
| Miami, FL | $19,265 | $59,520 | $300K | 13.7 | 10.1 | 3.6 |
| Milwaukee, WI | $17,418 | $65,527 | $208K | 9.2 | 6.3 | 2.9 |
| Minneapolis, MN | $17,715 | $83,933 | $275K | 8.8 | 6.6 | 2.3 |
| Nashville, TN | $18,917 | $67,802 | $288K | 11.5 | 8.5 | 3.1 |
| New Orleans, LA | $18,592 | $52,910 | $209K | 11.8 | 7.9 | 3.9 |
| New York, NY | $18,054 | $83,410 | $380K | 11.4 | 9.1 | 2.3 |
| Oklahoma City, OK | $17,278 | $60,462 | $179K | 9.1 | 5.9 | 3.1 |
| Orlando, FL | $18,997 | $57,270 | $250K | 12.4 | 8.7 | 3.7 |
| Philadelphia, PA | $18,226 | $74,413 | $196K | 7.9 | 5.3 | 2.6 |
| Phoenix, AZ | $17,500 | $65,451 | $270K | 11.2 | 8.3 | 2.9 |
| Pittsburgh, PA | $18,927 | $70,169 | $162K | 7.6 | 4.6 | 2.9 |
| Portland, OR | $18,765 | $80,348 | $392K | 12.3 | 9.8 | 2.5 |
| Providence, RI | $15,025 | $71,118 | $267K | 9.8 | 7.5 | 2.3 |
| Raleigh, NC | $21,357 | $76,729 | $285K | 10.5 | 7.4 | 3 |
| Richmond, VA | $21,915 | $68,105 | $250K | 10.9 | 7.3 | 3.6 |
| Riverside, CA | $16,642 | $65,395 | $370K | 14.1 | 11.3 | 2.8 |
| Sacramento, CA | $17,592 | $69,851 | $395K | 14 | 11.3 | 2.7 |
| Salt Lake City, UT | $15,165 | $75,706 | $321K | 10.6 | 8.5 | 2.1 |
| San Antonio, TX | $17,089 | $57,888 | $225K | 11 | 7.8 | 3.2 |
| San Diego, CA | $15,984 | $78,433 | $565K | 16.6 | 14.4 | 2.2 |
| San Francisco, CA | $18,750 | $120,587 | $1.4M | 24.9 | 23.2 | 1.6 |
| San Jose, CA | $15,273 | $132,609 | $1.1M | 18 | 16.8 | 1.2 |
| Seattle, WA | $16,003 | $91,364 | $560K | 14.1 | 12.3 | 1.9 |
| St. Louis, MO | $19,229 | $68,805 | $176K | 8.2 | 5.1 | 3.1 |
| Tampa, FL | $19,313 | $57,591 | $225K | 11.6 | 7.8 | 3.7 |
| Virginia Beach, VA | $20,395 | $62,557 | $220K | 10.7 | 7 | 3.6 |
| Washington, D.C. | $22,803 | $100,467 | $390K | 10.2 | 7.8 | 2.4 |
| National | $17,938 | $65,879 | $308K | 12.3 | 9.4 | 3 |
| * Note: Years have been rounded to the nearest tenth and may not add up across each row. | ||||||
Under Warren's student debt forgiveness plan, the median 24 to 44-year-old homebuyer in Detroit, where the typical home costs $130,000, could save for a down payment in just 4.2 years—the shortest time in the nation—down from 7.4 years currently.
Metro areas with the highest ratios of student debt to income could see the biggest decrease in the time it takes to save for a down payment, with metros in the South like Memphis (4.3 years quicker), Birmingham (4.0 years quicker), and New Orleans (3.9 years quicker) among those where student-debt laden homebuyers stand to benefit the most.
To read the full report, complete with market-level data and methodology, visit: https://www.redfin.com/blog/elizabeth-warren-student-debt-forgiveness.