Kaptur Says Let Student Debt Pay for First-Time Home
January 5, 2016
By: Tom Troy, Toledo Blade
January 5, 2016
In an op-ed in The Hill newspaper today, U.S. Rep. Marcy Kaptur (D., Toledo) has tied the burden of student debt to the sluggish recovery of the housing market from the collapse of 2008.
"Drive through the neighborhoods of Ohio. You will observe thousands of vacant homes devoid of a generation of aspiring young homeowners," Kaptur writes in the opening sentence.
She said that in 2014, the percentage of first-time homebuyers dropped to 33 percent - the lowest in three decades.
Kaptur blames (in part) "overcharge" of student loan debt.
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.
Her idea is to let student debt be used as the basis for a home mortgage:
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.
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 said she's proposing a pilot, and is not introducing legislation for a full-fledged program. Legislation could follow depending on what the agencies learn during the pilot.