A theme of much personal finance commentary in recent years has been hand-wringing over how rising student loan debt burdens prevent young adults from buying a home.

A recent study from the Federal Reserve Bank of New York offers a compelling evidence that student loan debt burdens are a major factor behind the drop in homeownership among young Americans. That said, I believe the weakening hold of homeownership on the younger set is largely a welcome trend (with one major caveat I will get to.)

The New York Fed report highlights three factors that have shaped the behavior of young American consumers in the 21st century.

First is widespread student borrowing to pay for college; second, age-30 homeownership fell from 31 percent in 2004 to 21 percent by 2016; and third, the increase of young consumers living with parents or similar elders, to 45 percent in 2015. The economists calculate that as much as 35 percent of the decline in young American homeownership from 2007 to 2015 stems from student debt.

Why doesn’t this bother me? Postsecondary education is the best investment most people ever make. Despite the high cost of college, the average annual return on a bachelor’s degree and an associate degree is some 15 percent, more than double the average annual return to stock market investments since 1950. Homeownership generates returns in line with inflation.

I find the complaint odd that high student loan debts prevent people from taking on even higher mortgage debts. The average student debt per capita among 24-year-olds in the New York Fed study was $6,715. According to a report by the personal finance hub NerdWallet average mortgage debt in the U.S. is some $180,000.

The personal finances of multigenerational living are favorable and underappreciated. Pooling financial resources among the generations lowers the cost of homeownership. That’s before taking into account child care and easier monitoring when aging parents turn frail. Shared ownership allows young adults to build up savings and the older generation to draw down less on retirement savings.

My caveat? Too many young people borrow too much for their education. Young people should invest in their education but, at the same time, work hard at keeping borrowing to a minimum. Financial freedom is low overhead. In the new economy of flexible careers and multiple jobs, renting and multigenerational living can be financially savvy moves after graduation.


Chris Farrell is senior economics contributor, “Marketplace,” commentator, Minnesota Public Radio.