Association for Public Policy Analysis & Management

This paper studies the impact of student loans on homeownership in a distinctively constructed, nationally representative panel data set.  The data set combines (i) individual credit bureau data with (ii) records on college enrollment, graduation and major collected by the National Student Clearinghouse, (iii) federal student loans and Pell-grants records from the National Student Loan Data System (NSLDS) collected by the Department of Education, and (iii) school characteristics collected by the Integrated Postsecondary Educational Data System (IPEDS).   The data set starts with a sample of individuals who were 23 to 31 years old in 2003 and spans over the period 1997-2010.  To our best knowledge, it is the first data set that combines individual credit bureau record with individual records with detailed information on student loan borrower’s educational backgrounds and attainment.  We use the data to analyze the impact of student loan debt burden on the ability of households to enter homeownership, while controlling for important factors affecting homeownership decisions (such as the level of educational attainment) that previous research has ignored due to data limitations.  We find that controlling for educational attainment is fundamental to analyze the impact of student debt on homeownership. In particular, individuals with no debt and no college education are significantly different from individuals with no debt and college education.  This finding has important implications for studies based only on credit bureau records that do not allow distinguishing these two types of individuals.  Additionally, we find that student loans have [a small negative] impact on the probability of buying a house by the age of 30 during the period 1997-2010 for the specific cohort under consideration.