Student Debt and Homeownership Barriers in Washington, D.C.

Part 13 in our Millennial Student Debt series.

An overview of this report

In Washington D.C., rising student loan debt is associated with low homeownership rates, exacerbating racial and economic inequalities. Since the implementation of the COVID-19 repayment pause, there has been a slight decrease in overall student loan debt. Despite this, young borrowers in the District’s majority-Black neighborhoods continue to be burdened with disproportionately high student debt relative to income and low repayment rates. Bold policies, such as student debt forgiveness, could mitigate these disparities and make homeownership more accessible.

This new collaborative report from the Jain Family Institute (JFI) and the Economic Policy Institute (EPI) sheds light on the intertwined challenges of student loan debt and homeownership faced by young debtholders in D.C., highlighting racial inequalities and examining potential policy measures to mitigate these challenges.

Key Findings

• The decline in homeownership rates among young borrowers in D.C., from 22.1 percent in 2010 to 13.7 percent in 2022, is closely linked to the surge in student loan debt.
• Homeownership in D.C. is marred by racial and educational disparities, as majority-Black neighborhoods grapple with lower educational achievements and elevated mortgage denial rates.
• Young borrowers in D.C. not only have the highest levels of student debt in the United States but also face challenging debt-to-income ratios, exacerbating financial strain, particularly in majority-Black areas.
• The root causes of racial disparities in homeownership and mounting student debt in D.C. are systemic, necessitating multi-faceted federal policy for meaningful change.

Why this matters

Student loan debt is making it even harder for young people to buy homes in Washington, D.C., particularly for those in majority-Black neighborhoods. This creates a cycle where high levels of debt limit opportunities for homeownership, which is a crucial way to build wealth. The ripple effects of this issue extend beyond individual households, reinforcing existing racial and economic inequalities. The struggle to move from renting to owning a home impacts not just family stability, but also has wider consequences for community well-being and the transfer of wealth between generations. In a city with a stark racial wealth gap, the added obstacle of student debt further hinders efforts to achieve more equitable economic opportunities.

How to fix it

To effectively address student debt and homeownership issues in D.C., targeted policy measures are needed, including student debt forgiveness. Implementing such policies with broader eligibility criteria will create opportunities for increasing Black homeownership and wealth, thereby reducing the stark racial wealth gap. Finally, it’s vital for both local and federal governments to invest in programs that assist with down payments and to also focus on building more affordable housing to combat rising costs.