Student loans

Fewer student loans means more purchasing power

A good credit rating, work history, and the buyer’s debt-to-equity ratio are all factors that go into applying for a mortgage.

CORPUS CHRISTI, Texas — Millions more Americans will likely soon have more buying power when it comes to home loans.

President Joe Biden has announced his student loan forgiveness plan that could eliminate between $10,000 and $20,000 in college debt for those who qualify.

Less debt not only means more relief but potentially more opportunity.

When someone visits the office of Elsa Davila, Mortgage Sales Manager for Gateway Mortgagewho hopes to obtain a home loan, she checks three important factors:

RELATED: TAMUCC Reacts to Biden Administration’s Student Loan Forgiveness Announcement

A good credit rating, work history and debt ratio of the buyer.

“It plays a big power, debt to income ratios or the acronym DTI, that’s what it boils down to,” Davila said. “We see how much debt you have versus how much income you have.”

During this process, student loans play an important role. Davila adds that even if the loans are suspended or you don’t make a payment, it’s still calculated in your debt. This means it can reduce your buying power when it’s time to start looking for the perfect home.

“Absolutely. They come here and say I only have a car payment, but they have $60,000 in student debt,” Davila said. “It’s not something you can just pay or take away.”

This is where student loan forgiveness comes in. According to Maria Serna, Assistant Director of Financial Aid at TAMU-CC, the average islander debt has risen from $18,000 in 2018 to $14,000 in 2022.

“If your average debt is $14,000 and President Biden forgives up to $20,000, you can have all your loans forgiven. That’s huge, especially for our recent graduates,” Serna said.

She added that they have managed to reduce the average debt over the past few years through different programs offered at the university as well as monthly loan workshops. According to Serna, the workshops have seen people who have been making payments for more than 20 years on interest alone and have not even reached the principal amount yet.

“Withdrawing that $20,000 may pique the interest of someone who graduated in the ’80s,” Serna said. “Now those payments can finally start eating into the principal balance. I’m not exaggerating when I say it’s life changing for so many people.”

Serna said TAMU-CC is still well below the national average when it comes to college debt. They hope more people will take advantage of their monthly loan workshops, which are also open to the community.

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