When federal student loan payments resume Oct. 1 after more than three years of pandemic-induced administrative forbearance, they could have a dramatic effect on the housing market.

Almost 70% of the nation’s student loan borrowers are between the ages of 25 and 49, overlapping with the largest group of first-time home buyers, according to the latest quarterly survey of over 100 economists conducted by Pulsenomics.

What You Need To Know

  • Almost 70% of student loan borrowers are between the ages of 25 and 49, overlapping with the largest group of first-time home buyers

  • Federal student loan repayments were paused in March 2020 due to the pandemic and will resume Oct. 1

  • The average unpaid federal student loan for borrowers 25 to 49 years old is $38,000

  • A majority of economists in a new Pulsenomics survey said student loan repayments would negatively impact mortgage affordability

For individuals in that age bracket, the average unpaid balance of the $1.65 trillion in federal student loans is $38,000 — straining budgets that are already tight from inflation and hampering their ability to afford housing.

About 27% of economists in the new Pulsenomics survey said resumed federal student loan payments will have a significant and negative impact on the homeownership rate. More than a third (37%) of those surveyed expected the negative effects to last one to two years; 20% expected the negative effects to last three to four years, and another 20% expected them to last at least five years.

The median age of a first-time home buyer last year was 36 years old — up from 33 prior to the pandemic. Already, due to increasing home prices and mortgage costs and lack of available supply, first-time home buyers are making up a smaller share of the market, falling from 34% in 2021 to 26% in 2022.

In the survey, more than 40% of economists expect it will take at least five years for the median age of first-time buyers and first-time home buyers’ market share to return to pre-pandemic levels.

An even greater share of the economists (58%) in the survey said student loan repayments would have a significant and negative impact on mortgage affordability. More than a third (38%) of those polled expected the negative effects to last one to two years; 26% expected the negative effects to last three to four years, and another 17% expected them to last at least five years.

As mortgage affordability decreases, the potential for mortgage delinquencies increases. About a quarter of the economists said student loan repayments would have a significant and negative effect on mortgage delinquencies, with the worst effects felt over the next one to two years.

Rent affordability will also be negatively impacted. About half of the economists polled (52%) said student loan repayments would have a significant and negative impact on borrowers’ ability to pay rent, with the worst effects taking place over the next one to two years.