Homeownership is down. Student debt is up. Are the two linked? 

A few weeks ago, the U.S. Census Bureau confirmed that the homeownership rate has fallen to just under 63 percent — the lowest rate in over 50 years. For a point of reference, it topped off at 69.2 percent in 2004.

Some think these statistics are troublesome and worry about the negative impact dropping homeownership could have on families and communities alike. Ample studies and statistics over many years have demonstrated that owning a home is the primary foundation for middle class wealth in America and contributes significantly to stable families, succeeding students, safe neighborhoods and thriving communities.

Others, including the venerable opinion of the Wall Street Journal editorial page, fear that the drop in homeownership will rekindle Washington policymakers’ support for looser mortgage lending practices that contributed to the Great Recession. They claim government policies that subsidize housing, like the mortgage interest deduction, “misallocate resources to housing from other parts of the economy.” They don’t want the drop in homeownership to be used by lawmakers and regulators as an excuse to relax credit standards or down payment requirements for fear it will trigger another economy-wide recession and another round of taxpayer bailouts. 

Then there are some that argue the homeownership rate is also heading south because a new generation of homebuyers have not, and perhaps will not, enter the housing market. A major contributing factor to this phenomenon, they claim, is the magnitude of student debt that younger potential homeowners are carrying these days. A new study by the National Association of REALTORS^® (NAR) and American Student Assistance, a national nonprofit organization focused on financing higher education and repayment of student loan issues, demonstrates this is a real problem. The joint study shows the U.S. currently has a student debt load of $1.3 trillion, which is about 10 percent of all outstanding debt in America. That number continues to grow, in sheer size and percent of overall debt. NAR surveys show that 25 percent of recent homebuyers have student loan debt averaging around $25,000. For first-time homebuyers, that number was 41 percent. In Wisconsin, other surveys show that 70 percent of college grads leave school owing money, the third highest percent in the nation. Their average debt in 2014 for a four-year campus graduate was almost $29,000.

For nonhomeowners, an eye-opening 71 percent say student loan debt is a factor in delaying the purchase of their own home. Over three quarters of those say the problem is they can’t save for a down payment because of their student loan payments. The study also found that 69 percent of those who are delaying a home purchase say they don’t feel financially secure enough, and 63 percent say they can’t qualify for a mortgage due to their debt-to-income ratios. 

So what can or should be done? Some politicians espouse tuition-free college. As attractive as that might be, it seems impractical not to mention wildly expensive. College isn’t free, so someone has to pay for it. Moreover, focusing solely on the revenue side of the ledger ignores the spending side, including costs incurred by universities as well as their spending priorities. Students must also make sober decisions about the degrees they pursue and the prospects for after-college jobs and careers that pay them enough to repay their loans. 

One approach that has the support of NAR is legislation authored by U.S. Sen. Elizabeth Warren of Massachusetts. Sen. Warren’s bill, S. 2432, would allow borrowers to refinance student loans, which they’re not currently allowed to do. Warren argues that if homeowners can refinance mortgages and businesses can refinance business loans, why can’t students refinance their school loans? She estimates borrowers would save $650 million a year in interest payments if they could refinance their debt. In a personal plea for support for her bill, Sen. Warren told attendees at NAR’s Washington, D.C., meetings in May that those funds could be used for a down payment on a house or be applied to monthly mortgage payments. The NAR directors agreed and voted to support her legislation.

Purdue University president Mitch Daniels is proposing yet another, more novel no-loan approach. The former Indiana governor will be asking students to sign income-share agreements to pay back private investors a fixed percentage of their income after college, for up to nine years.

The exact terms of those contracts would vary from student to student, depending on factors such as a student’s major and job prospects. If a student makes under $20,000 a year for the entire length of the contract, they pay nothing and the investors lose their investment. It’s premature to know if this will work, but it’s certainly an innovative approach and puts no public funds at risk.

The reasons behind the current slide in homeownership are complex. The causes of escalating student loan debt, and what do to about it, are also complex. So long as homeownership remains the dream for most Americans, we should actively seek ways to keep that dream alive and available, for students and everyone else.