Do Student Loans Affect Buying a House?
Key Takeaways
- Student loan debt can affect mortgage approval by increasing a borrower’s debt-to-income (DTI) ratio.
- Higher student loan payments may reduce how much homebuyers can afford to borrow.
- Borrowers with student loans may need more time to save for a down payment.
- Some mortgage programs may offer more flexibility for borrowers with student loan debt.
Buying a home remains a key part of the American dream. A study from the National Association of REALTORs found that 87% of Americans described homeownership as part of “living the good life.”1
Unfortunately, for many, that dream is delayed, if not denied. While the median age of a first-time home buyer in 1981 was just 292, by 2024, the typical first-time buyer was nearly a decade older, with a median age of 38.3 What’s more, 86% of those currently renting would like to buy a home but don’t think they can afford it.4
So, what’s standing in the way of would-be buyers, and why are Americans waiting so long to buy a home of their own?
It isn’t always mortgage costs that affect many people’s ability to buy a home, but a different kind of debt entirely: student loan debt. The rise in student debt affects both the ability and desire to purchase a home, as well as the lifestyle choices that lead to property ownership.
Let’s take a look at how.
Who Carries the Student Loan Debt Burden?
With $1.6 trillion in collective debt outstanding, it’s important to consider who bears the burden of unpaid student loans. The answer is more people than you would think.
One in six adult Americans now has student loans, totaling 43 million individuals with outstanding educational debt.5 The numbers are even starker among young Americans, as one in four adults under 40 in the United States has debt acquired when earning a degree.6
Young people owe the most, as Americans aged 25 to 29 account for ⅔ of all federal student loan borrowers and hold 70% of all outstanding federal student loans. Older Americans aren’t unaffected, though. In 2021, borrowers aged 50 and up owed a collective $336.1 billion—more than five times the amount of student debt this demographic group owed in 2004.7
While some older Americans still have lingering student loans, parents are increasingly going into debt for their children’s degrees. There are 3.7 million families with Parent PLUS Loans, which parents use to fund their children’s undergraduate education. Collectively, this debt totals $104 billion.8
How Student Loan Debt Affects Buying a Home
Owing tens of thousands of dollars has a profound impact on the financial lives of borrowers, including their readiness to purchase a home, because student loans:
- Leave borrowers with less disposable income and more financial uncertainty
- Impact lifestyle factors that could delay the desire to be a homeowner
- Can influence mortgage approval odds
- Could impact credit, DTI, and other factors that determine mortgage rates
A study in 2024 found that 29% of Americans reported putting off buying a home because of their student loan debt.9
Unfortunately, money that would otherwise go to mortgage payments is likely being spent on loan debt, as evidenced by a recent Federal Reserve survey, which found that 19% of borrowers ages 18 to 29 would put student loan payments toward homeownership if their loans were forgiven, as would 12% of borrowers ages 30 to 34.10
Debt-to-Income Ratio
Debt-to-income ratio (DTI) is one of the key criteria mortgage lenders consider when determining if a borrower is eligible for a loan. Borrowers who owe too large a percentage of their income may be unable to qualify to borrow. Since student debt payments take up a portion of income, student loan debt can increase a borrower’s DTI and reduce how much they may qualify to borrow for a home.
Borrowers with student loans are also more likely to take on other debt, such as auto and installment loans, further increasing their overall debt burden and impacting home affordability.11
Credit Score
Borrowers with student loans are more likely to have lower credit scores.12 This is especially true among those who struggle with repayment. An estimated 9 million Americans are behind on federal student loans and could see their scores decline by up to 129 points.13
Credit score is a key factor in the mortgage qualification process, impacting both loan eligibility and rate offered. A low score can result in more limited and costly loan options, putting homeownership further out of reach. However, improving your credit makes you eligible for lower interest rates and helps make owning a home more affordable.
Monthly Payment Calculation
Mortgage lenders typically include student loan payments when calculating a borrower’s monthly debt obligations. Higher monthly student loan payments can increase your DTI, which may reduce the loan amount you qualify for or make it harder to get approved.
Some lenders may calculate student loan payments differently depending on the loan type and repayment plan. Even borrowers on deferred or income-driven repayment plans may still have an estimated student loan monthly payment factored into their mortgage application.
Down Payment Savings
Student loan payments can make it more difficult for borrowers to save for a down payment. With more income going toward monthly debt payments, it may take longer to build savings for upfront homebuying costs such as a down payment, closing costs, and moving expenses.
As a result, some borrowers may delay buying a home while they focus on paying down debt or building their savings.
Financial Stability
Feelings of financial instability can also make Americans less eager to take on the responsibilities of homeownership.
Unfortunately, student loan debt often exacerbates financial woes, with around 25% of all loan-burdened college graduates ages 25 to 39 reporting that they find it either difficult to get by financially or are just getting by. This is a stark contrast to the 9% of those without student loans who say the same.6
Those struggling with financial worries are less likely to want to buy a home and less likely to be approved for a mortgage, even if they’re interested in doing so.
How Much Home Can You Afford?
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Tips for Buying a Home With Student Loans
Buying a home with student loan debt can be challenging, but there are steps borrowers can take to improve their chances of qualifying for a mortgage.
- Lower your DTI: Paying down existing debt or increasing your income may help improve your debt-to-income ratio. Avoid taking on new loans or large credit card balances before applying for a mortgage.
- Improve your credit score: Making payments on time and keeping credit card balances low may help improve your credit score. A stronger credit profile can help borrowers qualify for lower rates and more favorable mortgage conditions.
- Consider different loan programs: Some mortgage programs, like FHA loans, have more flexible credit score, down payment, and DTI requirements. Exploring loan options may help you find a program that better fits your financial situation.
- Get prequalified or preapproved: Getting prequalified or preapproved for a mortgage can help you understand how much you may be able to borrow before starting your home search. Mortgage prequalification with Freedom Mortgage only takes a few minutes and is valid for 90 days.
With the right preparation and loan program, you may still be able to achieve your homeownership goals even if you have student loans.
The History of Student Loan Debt
Today, Americans are more burdened by student loan debt than at any time in history, with the total outstanding federal student debt estimated at $1.6 trillion at the end of 2024.14
Sharp increases in tuition prices15 and a growing demand for college degrees for even entry-level positions7 have contributed to more Americans borrowing and taking on larger amounts of debt than ever.
While this problem has particularly impacted younger Americans,15 older adults are also facing record student loan balances8—both their own and their children’s.16
Here are some figures to consider:
- Between 1980 and 2019, the average cost of college increased by 169%7, while median income increased by just 53%.17
- Earning just a bachelor’s degree could now leave today’s students with around $30,000 in outstanding federal student loans to repay—a tough burden given the median annual salary among 20 to 24-year-olds was just $41,184 in the first quarter of 2025.18
- Master’s degree holders owed $67,800 on average, and those with a doctor’s degree in a professional field had average outstanding loan balances of $177,100 as of 2024.17
- Today, nearly ⅔ of positions require post-secondary education and training.14
As student loan balances continue to rise, many borrowers are facing increasing financial challenges that can affect their ability to save for and purchase a home.
Buying a Home With Student Loans FAQs
If you’re still wondering how your student loans may affect your ability to qualify for a mortgage, here are answers to some common questions.
Should I Pay Off My Student Loans Before Buying a Home?
Not necessarily. You may still qualify for a mortgage while carrying student loan debt, especially if you have stable income, good credit, and manageable monthly payments. In some cases, saving for a down payment or paying down higher-interest debt may be a higher priority.
Can You Buy a House With Student Loans in Deferment?
Yes, it may still be possible to buy a house if your student loans are in deferment. However, some lenders may still include an estimated student loan payment when calculating your debt-to-income ratio, even if your current payment is paused.
Do Student Loans Affect Your Credit Score?
Student loans can affect your credit score in several ways, including payment history, total debt, and credit mix. Making on-time payments and keeping loans in good standing may help build a stronger credit profile over time, in turn making homeownership less expensive and more accessible.
Final Thoughts: Is Homeownership Still Possible With Student Loans?
Student loans undoubtedly make borrowers more likely to delay homeownership and less likely to be in a financial position to make a purchase.
However, this doesn’t mean that buying a home is out of reach. Freedom Mortgage offers a variety of loan options for borrowers facing various financial situations, including those dealing with student loans. Options include government-backed loans such as FHA, VA, and USDA loans, which allow low or no down payment options and lower credit score requirements.
To explore your personalized loan options, get started today with Freedom Mortgage. We’ll help you navigate the process to find your best path to homeownership.
The ideas outlined above are for informational purposes only, are not intended as investment or financial advice, and should not be construed as such.
This is not a commitment to lend. Freedom Mortgage Corporation is not, nor is it affiliated with, any governmental agency or organization. Loans are subject to eligibility, credit approval and property requirements.
Sources and Methodology
- Fannie Mae. "Consumers’ Homeownership Aspirations Remain High Despite Higher Home Prices and Interest Rates." (June 6, 2023.)
- National Association of Realtors. "40 Years of Home Buyer and Seller Data: How Does the Profile Compare?" (November 11, 2021)
- National Association of Realtors. "Highlights From the Profile of Home Buyers and Sellers." (2024)
- CNN. "More than half of American renters who want to buy a home fear they’ll never afford one."
- Library of Congress. "A Snapshot of Federal Student Loan Debt." (February 19, 2025)
- Pew Research. "5 facts about student loans." (September 18, 2024).
- Georgetown University McCourt School of Public Policy. "If Not Now, When." (2021)
- AARP. "Student Loan Debt Is an Unheralded Burden for Older Borrowers." (August 2022)
- Gallup Poll. "Most Student Loan Borrowers Have Delayed Major Life Events." (April 17, 2024).
- Board of Governors of the Federal Reserve System. "Economic Well-Being of U.S. Households in 2022." (May 2023)
- Federal Reserve. "Student Loans, Access to Credit and Consumer Financial Behavior." (June 2021).
- Policy Briefs. "Mortgage Risk and Disparate Impact. Associated With Student Debt." (2023)
- VantageScore. "VantageScore® Analysis Finds Benefits for Borrowers Who Resume Student Loan Payments, While Many Will See Lower Credit Scores." (February 27, 2025).
- U.S. Department of Education. "U.S. Department of Education to Begin Federal Student Loan Collections, Other Actions to Help Borrowers Get Back into Repayment." (April 21, 2025).
- Education Data Initiative. "Average Cost of College By Year." (September 9, 2024).
- The Century Foundation. "Parent PLUS Borrowers: The Hidden Casualties of the Student Debt Crisis." (May 31, 2022).
- St. Louis Federal Reserve Bank. "Real Median Personal Income in the United States."
- Bureau of Labor Statistics. "Median usual weekly earnings of full-time wage and salary workers by age and sex."
Christine Rakoczy has been a financial writer since 2008, contributing to major publications, including Credit Karma, CBS MoneyWatch, WSJ, and Forbes Advisor. While her special focus is diving deep into mortgages, Christine has extensive experience with all types of financial topics.
In addition to writing for online articles, Christine has also taught business administration courses at a career college and has served as a subject matter expert on numerous business and legal courses.
Christine earned her JD from UCLA School of Law in 2008 and has a BA in English, Media, and Communications, with a Certificate in Business Administration from the University of Rochester.
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