Playing the long game
August 21, 2014
How much house can you afford? With student loan debt, the answer, unfortunately, might be zero.
As noted in our previous post, between 2004 and 2013, student loan debt in the United States ballooned by more than 400 percent, to around a trillion dollars. While student loan debt certainly doesn’t stop everyone, many experts say it’s going to delay homeownership for a whole generation of first-time homebuyers.
We talked to one would-be homebuyer for whom waiting is the only option. Unless you consider moving to a cheap market far away from family, friends, and job opportunities an option. His story is one of hunkering down, playing the long game, and enjoying where he is in the meantime.
Renting: not loving the lifestyle
Meet Ed, age 29. He has a BA in English lit from the University of Massachusetts Dartmouth and a master’s in journalism from Emerson, and he is indeed a working journalist. What was the damage? About $80,000. He’s paid back $20,000 so far, at $900 a month. “I’m getting there,” he says.
Ed rents in Brighton, a residential neighborhood on the outskirts of Boston whose tree-lined main artery is full of restaurants and small businesses. It’s one of Boston’s more affordable neighborhoods, but even so, the median home price is about $325,000.
“I have been just enjoying living where I live, and there’s nothing wrong with that,” says Ed. “But I’m sort of at the point where I’m not really loving the lifestyle of renting. You know, having a landlord and not being able to make all the decisions about the place where I live. And also, watching the amount I pay each month just go down the drain, when I could be putting it toward something that eventually, one would hope, will have some value.”
Boston: not much for your money
The problem, though—even without student loan debt—is that Boston is expensive.
“It's not the best place to be a homeowner. You could spend a half million dollars and just get a tiny one-bedroom thing in South Boston,” he says, citing one of the city’s more expensive neighborhoods. “You pretty much have to be a millionaire, I feel like, to buy anything in the city. Where I live, it's not as crazy as downtown, but still, I’ve seen listings for fairly small single-family homes that are over a half million.”
City prices will always be an issue, he says, given his career. “I chose to enter a profession that isn’t exactly known for its generous salaries.”
Fortunately, the suburbs appeal to Ed, who grew up in one. “I’m not intent on living in Boston my whole life. I’m very comfortable in the suburbs, and you can get something more reasonable out there for a more reasonable price.”
But a place in the suburbs still requires a down payment. “When I’m paying close to $900 a month on my loans, it’s really hard to save up that kind of money. I put away as much as I can, but it just doesn’t add up that quickly when such a large portion of my paycheck goes straight out the door.”
Regret, no. Frustration, yes.
Ed says he’ll just to keep paying off as much as he can every month, and keep saving as much as he can along the way. He expects to be debt-free—i.e. able to save that down payment—in six or seven years. That means no home until perhaps his late thirties. “I wouldn’t say that it’s totally counter to my plans,” he says of waiting. “But at the same time I don't feel that it’s ideal to push homeownership back that far.”
The happy part of the story is that those loans also left him with a good job that he enjoys, covering business analytics technology for a news website: “More and more, I feel like I’m in a place where I want to be with my career, and it's hard to see how I would have gotten where I am right now without the educational decisions I made.”
However, the rest of the middle class lifestyle is proving harder to get.
“You go to college thinking you’re going to come away from it with a good job, and everything will be fine,” Ed says. “It’s just frustrating to me that you can't have both—that you can't get where you want to go in your career and still pursue the life that you want.”
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