Published February 2013. Financial aid and student loan rules change often, so some details may be out of date. Ask us about your situation.
Many people go to college with the intention of landing a dream job, eventually starting a family and, in many cases, going on to enjoy homeownership. However, as student loan debt across the country hovers around roughly $1 trillion, many college graduates are finding it hard to fully take advantage of the American dream of homeownership.
According to figures from the Federal Reserve Bank, the percentage of borrowers who have defaulted on their student loans has increased to one third of all graduates who took out loans to help pay for college in 2012. This is up from a quarter of the population of borrowers in 2011 and roughly 20 percent the year before.
When borrowers default on their student loans, this has a major impact on their credit score and is a glaring mark against them on their credit reports. Lenders will be extremely apprehensive about entering new loan agreements with these kinds of graduates and at the very least only agree to terms with extremely high interest.
Mortgages and student loans weigh heavily on an individual's credit report and are considered "positive debt" if managed properly. Essentially, borrowers need loans like these to demonstrate to creditors that they are capable of managing their money. However, if this "positive debt" is mismanaged, new lines of credit are tough to come by. This is especially true with home mortgages and student loans as these are among the largest debt agreements a borrower can sign on to, and if student loans are hard to handle for an individual, lenders aren't likely to cooperate.
This is why graduates should explore all of their student loan repayment options and contact a financial aid consultant to make sure their debt is properly managed.