Student Loan Change Could ‘Squeeze’ Housing Market

As of May 5, 2025, a significant policy shift in student loan repayments is poised to impact the U.S. housing market. The Department of Education’s decision to resume collections on defaulted federal student loans, after a prolonged pandemic-related pause, is expected to affect over 5 million borrowers who haven’t made payments in over a year, with an additional 4 million severely delinquent.

The Resumption of Student Loan Payments

The reinstatement of student loan payments introduces new financial obligations for millions of Americans. This change is anticipated to influence borrowers’ credit scores and debt-to-income ratios, factors critical in mortgage lending decisions.

Impact on the Housing Market

The resumption of student loan payments is expected to have a ripple effect on the housing market. With increased monthly financial commitments, potential homebuyers may find it more challenging to qualify for mortgages. This development could lead to a decrease in homeownership rates, particularly among younger demographics burdened with student debt.

Broader Economic Implications

Beyond the housing market, the return of student loan payments may influence broader economic trends. Consumer spending could decline as borrowers allocate more of their income to loan repayments, potentially slowing economic growth. Additionally, the increased financial strain may lead to higher default rates, further impacting credit markets.

Navigating the Changes

Borrowers are encouraged to explore available repayment options, such as income-driven repayment plans, to manage their obligations effectively. Staying informed about policy changes and seeking financial counseling can also aid in navigating this transition.​

As the policy takes effect, its full impact on the housing market and broader economy will unfold, underscoring the interconnectedness of student debt and financial stability.