Student Loan Forgiveness: Effects on Housing Market

Student loan forgiveness and its effect on the housing market. So there’s a lot of items to go within this and we’re going to kind of like discuss it, unpack it and see where it leads us in controversy as well.

You know, there’s a lot of people that just don’t feel it’s fair. And I’m sure there will be lawsuits and things happening. Yes. But the bottom line is this. The way I look at it, you know, we receive benefits that our parents didn’t get and now maybe our children will be receiving benefits that we didn’t get. It’s okay. Things happen, right? We went through a pandemic.

We went through things. So I’m just like, yeah, it is what it is and just move on. People get so emotional over this that I’ve heard, so it’s just like, okay, so I’m going to remove my personal feelings about it and just discuss it over mine. I didn’t. I’m going to just discuss it from a real estate perspective and see what happens here, because that’s what we’re all about. And what we’re going to do is take a look at what it all comes down to.

So I think there’s a large psychological effect, and I believe that’s a big, big deal. Would the younger generational workforce members, the psychological they’re into things like a burden? Yeah. They’re into like good vibes and all those good vibes too. Yeah, I know. But it’s like super important for him to have good vibes. And with that they, they feel a lot of burdens, right?

So understanding them just a little bit better, this is going to unburden them, right? So now they’re unburdened and the actual amount.

So if we look at it, you’re going to be forgiving in amount for these individuals. Right. And when you do that, it’s going to allow them to be able to borrow more, but in a different way. So they were having trouble paying this loan back or maybe it was burdensome. So now they’re going to be able to now that that’s gone, what do you think’s going to happen?

Do you think they’re going to take this extra money and do something productive with it, or are they going to buy video games or. No, these these payments that they’d had to make? So that’s going to shave down, you know, and give them their time or whatever it is, their total liabilities. Yes. Because what it comes down to is it’s a liability thing. Right. So if you’re looking at your borrowing power, what you can do is you take everything into account and it’s there’s a ratio.

So it’s how much you earn your gross income and how much you have liabilities for on a monthly basis. Right. And if you remove one of those items, then you increase the borrowing power of the individual somewhere else. So you could use it in all different types of ways. You could rack up more credit card debt. Not a good idea. So that’s a bad example of what to do.

The money, right, to rack up more credit card debt, burning a hole in your pocket because now you don’t have that extra 304 hundred.

I don’t know how much it is a month then put it towards. Yeah, I’m probably saying it’s less than that because if there were forgiving 10,000, 10,000 or 20,000 and if I was to kind of think through the payment terms on it, interest rates are relatively low on student loans and you have options on payment terms for like five, ten or I think up to 20 years. Right. So now if you had if you were having a problem paying it back, most likely you’re on a longer repayment schedule is my guess.

And if you were getting ten or 20,000 forgiven, maybe it affects you 100 and some dollars, $150 a month for kind of the average person who would be on a longer term repayment schedule. Somewhere between 10,020 thousand, maybe it’s $150 a month is kind of my guess on what the what the actual payment is. So now they don’t have to make that payment. Right.

But the challenge really is when I think about it being a psychological benefit that allows them to now unburden them and buy something else more expensive like a home. I also think about it and they haven’t been actually making that payment because of. Right. It’s been frozen for a long time. So they haven’t made that payment. So most of these people have already made either a pledge, you know, like psychologically to themselves or they spent it.

Yeah. Or they’ve been spending that money. Other places it’s already been allocated. So I don’t know if it’s a huge thing that they’ll be now all of a sudden like, Oh, I was paying, I don’t know. I do think mentally just knowing that that’s gone it like it just does something psychologically.

And I think this would be a good post, you know, maybe a social media post or something for us to just, you know, get out there to people who are. Being relieved of some of that debt. Yeah. So let’s talk about super bad things to do. That would be like more credit card debt with that extra money, right? That’s not going to be good. Just more vacationing or something like that. Maybe that helps.

Or mental health. Right. But now that money’s not going towards long term things. The concept of education is that you carry something in your brain that allows you to make more money over a period of time or live a better life. And some people might then say that, well, I should use that for this. Good. Right.

Whatever that happens to be. You know, I talked with some younger people myself recently and told them that maybe a good idea is to take that same money and apply it towards a retirement savings account for yourself to start that at a younger age.

And maybe that helps out kickstart their future in some way, shape or form. I said, Because if you were currently allocating that much over here, then you could continue to allocate that. But in this way and take that amount that you were going to have reapplied here and then have it grow right and see that exponential growth over time rather than showing the balance going down.

So I think that would be one good way to do it is to save for retirement or home ownership is also good. Yeah. So, you know, if you would, I’m sure you know any one of our lender partners, Brandon, any of them would love to sit down with them and and show them, you know, how this affects them, right? How removing this from their debt, what it does and and how it can you know, relay into.

Yeah. And my hope is that just small percentages of people are now added to the the home market that would otherwise be renters because it is a very valuable thing to move from renting to purchasing. And if that happens in a small amount, then maybe all of this is really for good and it really does kick start the next kind of wave of price appreciation of people buying into homes and, you know, raising demand as well. And, you know, Stacy just brought up a point.

The people who recently paid off their student loans or paid cash, you know, it affects them psychologically, too. It’s like, really, why do I do that? And so I just wonder if there will be something in there. I mean, it’s part of the pandemic, right? And people got paid in various aspects during the pandemic for different things. Right. So I don’t know. It is tough. I hear it all the time. And, you know, I think initially you’re like, really? Well, what about all the money we paid for our kids, right? How do we get that back?

So I get it. But yes, people are going to look at it all different ways, including the people who are now going to school. Are they going to not pay theirs because they say it should be forgiven for me as well for them? I’m not going to voice my opinion. No. And I do feel like, you know, I always wonder what’s going to happen after. Right? Ah, is now tuition going to go up? It’s just a slippery slope.

We’re just talking about it from a real estate perspective. So let’s let’s really keep to that. Hopefully, we’ve had some hopefully this kick starts the next good wave for us from a real estate perspective with bringing new people to the market to purchase. Because when they come, when you increase the market size, then you’re going to increase prices, you’re going to increase demand, you’re going to be having to build new properties.

It might be a new type of product, but there are going to be things that are going to be built. So if you’re eligible for student loan forgiveness, call us because now we can turn that into home ownership. Yes. And maybe. Okay, so think about the double domino from that. So look at it from a parent’s perspective. If you just move in with your parents and pay their their debts.

Yeah. Or move out. So what’s going to probably happen is, you know, it’s not always the first domino, it’s the unintended consequences. That’s what I’m always looking that do that do come up. So if the first thing was maybe some of these people buy new homes, right. To get them out of renting, well, maybe they were cohabitating with their parents still. And if that gets them out of their parents house, then their parents in their type of property they have will shift to something different.

And there’ll be a transaction with the parents buying something else because there has been a huge shift, a big, big paradigm shift of a lot of people at a certain age. Yeah, right. Staying. Home longer. And when that happens, the type of home that the parent has is it often stays the same. So I think there’s going to be this initial wave and then a secondary wave when all of a sudden the parents are like, Whoa, this is what I need.

So look for the ripple effect to come from this. So I got a funny story before we we wrap this up, but I was talking to a friend of mine yesterday and their kids are older as well. And he’s like, you know, divorced parents used to argue over who gets the kids. It goes and we argue who the opposite. He’s like, we argue over, no, you get them, not me. This weekend for older ones, for older ones, for older kids are like, oh, my goodness. That was really funny. So anyhow, that’s it. That’s all we got.

Episode Links

Brandon, Student loan forgiveness, Mike Acquisto , Shana Acquisto , TNT 

Episode Recorded Live on YouTube 09.01.22

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