Stalling on homes
For some millennials, college loan debt proves to be barrier
In recent years, the Albany metropolitan area has been named a top destination for millennials to live, earning top spots on several “best” lists, joining the Capital Region with cities like Charlotte, Denver, Pittsburgh and St. Louis. But with the claim of being a vibrant, affordable, commuter friendly place to live comes a bit of fine print —that many college-educated individuals are living with enough student debt to make permanent residency in the capital city feel like a pipe dream.
Heather Thompson, 25, of Saratoga Springs, owes roughly $89,000 to college debt, putting her well above the state’s average of $37,708 per borrower. Today’s total student loan debt in New York is $99.8 billion, according to a recent poll by the National Association of Realtors.
“When I first graduated college, I didn’t know how high my payments were going to be,” said Thompson, who earned a bachelor’s degree in health sciences at Russell Sage College in 2018. “I started out paying $1,000 per month, and have refinanced my loans twice to bring the interest rate and payments down.”
Thompson’s refinanced monthly loan payment is more than $600, double the Albany average, according to the NAR poll. It’s more each month than her share of the rent. Thompson and her boyfriend, Jordan Turner, share an apartment and recently adopted a dog. They would like to expand their living space, but because of Thompson’s debt, they don’t see a way to make it happen.
“The thought of homeownership is far away from where I’m at financially,” said Thompson, who juggles several parttime jobs. She’s a nanny, a social media manager and a model. “I don’t have much of a savings account once I take care of my bills and use what I can to treat myself or just live life. My stepdad recently co-signed on another loan so I
could lease a car.”
Thompson says there are upsides to renting within walking distance to downtown Saratoga Springs, where the median list price for a single-family home in December 2021 was $619,000. In lieu of a private outdoor space for their puppy, the couple walks to local parks, restaurants and attractions. Thompson felt less pressure making the move into her boyfriend’s apartment, foregoing
serious credit checks or income verification more commonly associated with the mortgage application process.
“It can be very difficult for buyers with student debt to apply for a mortgage,” said Mell Meus, a mortgage loan officer at Fairway Independent Mortgage Corp. “Lenders are required to include a percent of the total student loan balance in the debt-to-income ratio — which ultimately takes away from the
amount of funds a person can borrow.”
The median sales price for a home in the U.S. was just $400,000 in the fourth quarter of 2021, according to the St. Louis Federal Reserve. In the Capital Region, a report on October sales prices from the Greater Capital Association of Realtors reported the median sales price of a single-family home was $256,000.
Meus said a potential buyer with a high amount of student debt should
work to minimize debt in other areas, such as credit cards or auto loans, and also be open to purchasing a multifamily unit to ultimately lower the cost of a future mortgage.
“We are able to use 75 percent of the potential rental income from the nonoccupying unit for qualifying for a mortgage, which translates to more income to offset the student loan debt,’’ Meus said.
If Thompson and her boyfriend did consider buying a home in the shortterm, it would likely require them to relocate to a more affordable city for first-time buyers in the Capital Region. They’ve also considered moving to Florida for better cost of living options, but said they have family in the Albany area that helps ground them here.
“I’m hoping within the next two years we could save up to split a down payment between the two of us,” Thompson said. “I am hopeful, but I am not looking forward to paying back the rest of my student debt over the next 15 years.”
Like many other millennials that make up nearly 13 percent of the local population, Thompson is in the same position now that Ali and Josh Lupo found themselves after graduating from state universities in 2013 with a combined $100,000 in student debt.
“Our initial mindset after graduating (with so much debt) was that we weren’t alone, and it wasn’t a big deal if it took us a few decades to pay it off,” said Ali Lupo, who now goes by “The Fi Couple” on Instagram with her husband. “It wasn’t until we began to plan and budget for our wedding in 2018 when we took a hard look at our finances.”
The couple quickly realized they were spending as much each month as they were earning, and their student loan payments totaled what a mortgage might cost.
“Our debt was a massive barrier to us buying a home, starting a family, saving for retirement or transitioning to less stressful careers,” Ali Lupo said. “We knew we needed to get rid of this debt
to change our life. And no one was going to come and save us.”
The Lupos invested in real estate as a potential path to earn extra income and get savvy on saving and spending.
“We skipped our honeymoon, scraped together every dollar we had and bought a 120-year-old duplex,” Josh Lupo said. Renting out one of the units decreased the couple’s cost of living and paid more than half the mortgage payment, allowing them to gradually increase their income and put leftover money toward their student debt.
Today, the Lupos have two investment properties in Rensselaer County and are debt free, having cleared their $100,000 of student loan debt in three years. They post advice and tips on Instagram on how to use real estate as a tool create wealth. They have more than 85,000 followers.
“We made a bunch of financial mistakes, had a ton of debt, and were very average income earners with no experience in real estate,” Ali Lupo said. “And
despite all of that, we were still able to invest in real estate and pay off our student debt in just three years.”
Their goal is to normalize conversations about debt, personal finance and investing for the average millennial, and to let it be known the path they took in real estate is not only for handy DIY-ers or those that are already wealthy.
“We knew we couldn’t afford our dream home or anything even close, but rather than continue to feel hopeless and frustrated about our debt, we took ownership and responsibility for it.”
The Lupos learned about real estate investment in online communities, books and podcasts. After paying off their debt, they have also eliminated monthly housing costs and are on track to retire sometime in their 30s.
“If home ownership is a goal, we recommend speaking to a mortgage lender and getting all the facts regarding your debt-to-income ratio and how your student loans will impact your ability to buy a home,” Josh Lupo said. “It’s been a difficult journey and we’ve made a lot of sacrifices, but every choice we’ve made has brought us closer to our ultimate dream of being able to spend more time doing what we love with the people that mean the most.”