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Unleash the Next Generation of Homeowners: Renegotiate
Student Loan Debt
By Rep. Marcy Kaptur (D-Ohio) -
Drive through the neighborhoods of Ohio. You will observe
thousands of vacant homes devoid of a generation of aspiring
young homeowners.
The opportunity for this generation to buy a first home has
been thwarted by sluggish income growth in the job market
often made worse by the overcharge of student loan debt.
That debt has put homeownership out of reach for millions of
creditworthy borrowers.
All across America, this story repeats itself. Millions of
habitable homes sit unoccupied.
In 2014, the percentage of houses sold to first-time
homebuyers dropped to 33 percent, the lowest level in three
decades. These separate but related conditions retard
economic growth, depressing home purchases across our
country. These trends must be reversed. Debtors must become
equity stakeholders.
The current, slow recovery is the first since World War II
in which housing has not led our economy forward. At the end
of last year, nearly 17 million homes sat vacant in the
United States.
That’s enough empty homes to house the combined populations
of Ohio and Indiana. Vacant structures also drag down
adjacent property values and contribute to a downward spiral
in neighborhood stability and worth.
Last year, more than 57,000 homes sat vacant in my
congressional district alone. Just in October 2015, there
were more than 5,300 homes in my home state of Ohio that
remained on the market for nine months or longer. Those
homes have a combined value of $1.9 billion. These
under-invested assets represent a vast, untapped source of
wealth creation for families and our nation.
Meanwhile, student debt in the U.S. currently totals $1.3
trillion. More than 40 million Americans have at least one
outstanding student loan, a number that is up significantly
from 29 million Americans just 10 years ago. Student loan
debt is weighing down millions of young families,
effectively locking out their buying power to purchase their
first home, the most common way in which Americans have
grown wealth in previous eras.
There is a lending instrument already in widespread use that
could serve as a bridge for creditworthy student borrowers
to become homeowners: the home mortgage. This common tool
has the power over time to transform the stream of student
loan repayments by creditworthy individuals into
homeownership.
Building a road forward for student debt holders through the
home mortgage instrument would require cooperation of three
federal departments: the Department of Education, Department
of Housing and Urban Development (HUD) and the U.S. Treasury
Department.
This presents a surmountable challenge. An initial test of
this concept could take the form of a pilot project directed
through HUD’s Federal Housing Administration (FHA).
Creditworthy federal student debt holders could be connected
with available housing properties held by or serviced
through the federal government or local county land banks.
By arranging prudent financing alternatives that recalculate
terms, debt-to-income ratios, mortgage interest rates and
other factors, the FHA could transition shorter-term student
debt into longer-term home ownership. The economic and
financial gains are potentially even greater in the long run
as housing values rise.
Over time, participants would help restore neighborhoods,
transform their debt to equity, buoy property values locally
and improve the FHA ledger simply by maintaining and
investing in a home.
The status quo has created a permanent debtor class of
millions of student borrowers. This is not in the public
interest. Instead, America needs home equity stakeholders.
If America continues to do nothing, thousands more student
debt holders will live, work and eventually retire without
ever escaping the burden of their debt. At the same time,
first-time housing purchases will continue to be retarded,
and our neighborhood housing stock deteriorates.
Congress has the power to release the debt stranglehold on
the next generation.
Let’s transform student loan repayments into equity
stakeholders. We have the resources, the power, a compelling
economic interest and a moral responsibility to do something
about unshackling the aspiring generation. Let’s get
started.
Kaptur has represented Ohio’s 9th Congressional District
since 1983. She sits on the Appropriations Committee. This
article is reprinted with permission from The Hill newspaper
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