This article talks about how Fannie Mae is taking steps to
make it easier for many student loan borrowers to own a home and refinance a mortgage. Millions of people have student debt
($30,000+ on average), which has become a large concern because those loans
have postponing home buying and causing a drag on the economy. As an attempt to decrease the concern and fix
the drag on the economy, Fannie Mae stated that it was easing the path for student
loan borrowers in a few different ways. First,
it is expanding its cash-out mortgage refinance option. This will let borrowers trade high-rate
student loan debt for lower-rate home loans.
Second, borrowers applying for a mortgage may now avoid debt being paid
by others from their applications. The
third change helps those with student loans and who are on flexible payment
programs by tying monthly loan payments to a borrower’s income. It will be interesting to see how these
changes work out and if they will actually solve the issue. These changes were announced on Tuesday and
are effective immediately.
4 comments:
This is of extreme concern to all of us, students, due to the fact that, even though loans and state intervention stretch the possibility of accessible education to all, a counteracting factor plays a key role when students graduate swamped in debt and have to deal with such economic burden. The start of the "real world" for many of us seem to kick off on the negative spectrum, with loans to be paid, deviating our attention to a crucial beginning.
Those in the bottom 20 percent will always be at a disadvantage in some ways. I believe that those in the top 20 percent live longer because they can afford healthier lifestyles, but it does not necessarily mean that those in the bottom 20 percent cannot choose to live differently in order to increase life expectancy. Unless we can find a way to incentivize people to live healthier lifestyles,this trend will continue and increasing the age would lift some burden, but also put many in a very poor situation.
In a report released last summer Goldman Sachs argued student debt only has a significant impact on home ownership when the borrower has more than $50,000 in debt or is making payments that exceed 5% of their income. The low ownership rate among millennials could be caused by other factors, not just student loans.
It seems like a good way to make college a little more affordable, but I can't be certain. The bottom 20% isn't gaining much out of it though so it's hard to say how effective it will be in getting lower income people an affordable education.
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