It takes the typical first-time American homebuyer a dozen years to both pay off student loans and save enough to make a 20% down payment on a median-priced home, Redfin, a real estate brokerage, reported Friday.
Enter Sen. Elizabeth Warren’s plan to cancel up to $50,000 of student loan debt. Redfin analyzed the Democratic presidential aspirant’s plan, and found that under it a typical first-time homebuyer could knock three years off the time needed to save for a full down payment.
In Redfin’s analysis, a typical potential first-time homebuyer was someone earning the national average salary of $65,879 for the Census Bureau’s 24–44 age bracket, with an average student loan of $17,938, based on data from LendingTree.
If the hypothetical aspiring homebuyer spent 10% of income ($549 per month) on debt repayment at the average 5.8% interest rate, it would take three years to pay off the student debt.
If after doing so, he or she started saving that 10% of income toward a full 20% down payment on the national median-priced home ($308,000), it would take a total of 12.3 years to pay off student loans and accumulate enough money for the full down payment ($61,600), assuming home price and income had not changed.
Under Warren’s debt cancellation plan, the time it would take to save for a down payment would shrink to 9.4 years, the analysis concluded.