Hefty student loans factor into young Americans’ decision to rent

Younger adults are more burdened by student debt than ever before, making it more feasible for them to rent than commit to buying a home.

Student loans are one of the fastest-growing segments of the American debt picture, along with auto loans. It outpaces the growth of credit card debt and housing debt, even as housing debt makes up the biggest chunk overall. Student loans make up the largest segment of debt outside of housing debt.

Debt share by age. 3Q2021

Younger adults are more burdened by student debt than ever before, making it more feasible for them to rent than commit to buying a home.

Student loans are one of the fastest-growing segments of the American debt picture, along with auto loans. It outpaces the growth of credit card debt and housing debt, even as housing debt makes up the biggest chunk overall. Student loans make up the largest segment of debt outside of housing debt.

Student loan debt has ballooned in the U.S. to $1.58 trillion as of the third quarter of this year. The burden falls most heavily on people ages 18 to 29 – older members of Generation Z and younger millennials who are in the midst of trying to get established in the working world. Adults ages 30 to 39 also shoulder more student loan strain than older adults.

For these young college-educated groups, the flexibility and affordability of lease payments are a persuasive alternative to getting locked into a mortgage. This is particularly true now, with housing prices still on a steep climb.

Those with graduate degrees, as well as those who attend medical school, law school or other professional fields, often take on crushing amounts of debt. But the subset of this group who enter highly compensated careers can afford to sign leases at new and luxury apartments more easily than they can take on a mortgage.

Some renters choose to rent because they enjoy the lifestyle and freedom it provides. And for some, renting is the result of their financial reality, and student debt is a prevalent factor.