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Already in debt, Generation D covets mortgages, parenthood

True or false: When young adults sink deep into debt, they delay marriage, parenthood and homeownership.

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The answer appears to be false. Despite record levels of debt, young people plunge ahead with these life-changing events that may drive them even deeper in debt.

Two studies have arrived at that conclusion. One report was paid for by the federal government and the other by Nellie Mae, a nonprofit provider of student loans. Researchers interviewed college graduates about their debts, especially student loan debt.

"There didn't really seem to be differences between people who had borrowed and people who hadn't borrowed," says Susan Choy, who wrote a report in 2000 for the U.S. Department of Education. The report, "Debt Burden Four Years After College," was the result of a survey in 1997 of people who had graduated from college during the 1992-93 academic year.

The report concluded that people who had taken out student loans were just as likely to buy a house or condo within four years of graduation as people who had never taken out student loans. The level of their debt had no bearing on whether they bought a home.

And four years after graduation, student loan borrowers were slightly more likely to have married (52 percent) than people who had not taken out student loans (50 percent). Student loan borrowers were slightly more likely to own a car and just as likely to have saved money for some purpose as their non-borrowing friends.

The Nellie Mae study arrived at a similar conclusion, but with a twist: The graduates who were surveyed exaggerated the effects of their debt.

Pay attention to what they do
Researchers for the Nellie Mae study asked college graduates how debt affected major decisions: Had student loan debt caused them to delay buying a house? Getting married? Having children? Buying a car?

Many said yes. But then the researchers looked at what the graduates actually did.

"Their behavior doesn't necessarily mirror what they're saying," says Diane Saunders, who co-wrote the report, called "Life After Debt: Results of the National Student Loan Survey."

The report was published in 1998 based on surveys of college graduates in 1997. Nellie Mae conducted similar surveys in 1987 and 1991.

Nellie Mae asked in 1991 and in 1997 if debt had caused college graduates to delay buying a house. In 1991, 25 percent said yes; in 1997, 40 percent said yes. But, just as Choy found, borrowers and nonborrowers were equally as likely to own their homes.

Saunders says: "What I think is most important there is to look at the increase over time in the number of people who say they're burdened by student loans. I think even psychologically this is fairly significant."

But significant of what, exactly? No one knows. It seems that borrowers might feel more stressed out nowadays, but it's tough to find out how that affects behavior.

Although debt didn't seem to affect homeownership, other factors did: People are more likely to own houses as they get older, get married and have children.

There was one exception: Choy found that people who had taken out student loans to go to graduate school were less likely to own a home. She believes that's because some of these people were still in grad school and not earning enough to buy a house.


-- Posted:Sept. 21, 2001




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