For years we've wondered why the cost of a college rises every year at a rate significantly in excess of the general inflation rate. So an item written last week by Katie McHugh, associate editor of The Daily Caller, caught our eye.
McHugh cites Mortgage Bankers Association data that shows that applications for new home loans fell by 20 percent over the past four months. During the fourth quarter of 2013 mortgage debt rose by only 2 percent, while college student loan debt rose by 5 percent in the same period. This has David Stevens, the MBA chief executive, linking rising college loan debt to the new home mortgage application decline.
Traditionally, first buyers are 40 percent to 45 percent of the mortgage market. “Today they're closer to 35 percent and we think that's directly correlated to student loan debt,” Stevens told McHugh. Having a large monthly college loan payment can make it hard to qualify for a mortgage, he said.
Young people today face a tough choice. They are constantly told failure to get a college degree will seriously reduce their earning potential. So many pile up debt earning a degree and then can't get a good-paying job or any job at all because the anemic post-2009 recession recovery has done little to spur job creation. Even worse, thanks to Congress, college loan debt can't be reduced or eliminated via bankruptcy proceedings.
Elected officials don't like to anger the real estate and housing industries. Perhaps talk of a link between student loan debt and mortgage activity will spur some added curiosity about soaring college costs.