As student debt levels and the cost of living continue to rise across the country, attaining both a college degree and owning a home is becoming more difficult in America. And when you combine the cost of a typical mortgage in your area with student loan debt, homeownership might no longer be a possibility.
A recent GOBankingRates study analyzed 100 U.S. cities to determine which places are the best and worst to live in if you’re dealing with student loan debt. The study was based on several factors, including the average amount of student loan debt in each city, the median home price, incomes and the percentage of income spent on mortgage payments. The results show that it’s possible to keep housing costs under a third of your income in certain cities — but not everywhere.
The study found that two New York City boroughs — the Bronx (No. 5) and Brooklyn (No. 1) — rank among the top five worst places to live if you’re still carrying student loan debt. Keep reading to find out why.
See the Full Study: Most and Least Affordable Cities If You Have Student Loan Debt
Paying Off Student Loans Is Tougher in These NYC Boroughs
The cost of living in Brooklyn and in the Bronx is daunting, especially for someone saddled with student debt. At the time the study was conducted, the average student debt in the Bronx was $27,732.50, while in Brooklyn it was much higher at $34,966.37. When you tack on the cost of housing, it becomes very difficult to live comfortably in New York with student loan debt — whether you’re a renter or a homeowner.
The median rent in Brooklyn is currently $2,357. Based on that and a median household income of $52,782, the annual rent in Brooklyn consumes nearly 54 percent of your income. In the Bronx, where the median rent is $1,905 and the household income is $36,593, rent consumes almost 63 percent of your income.
And if you’re trying to own a home with student debt, the circumstances aren’t much better. According to the study, the maximum home price someone with student debt can afford in New York is $357,300, and that’s a problem considering the median listing price of homes is $789,500, according to Zillow. In Brooklyn, the median home price is $725,000, and in the Bronx it’s $375,000.
|City||Annual Median Household Income||Monthly Rent||Monthly Mortgage||% of Income That Goes Toward Rent||% of Income That Goes Toward Mortgage|
According to the Federal Reserve Bank of St. Louis, the current average 30-year fixed mortgage rate is 4.41 percent. Based on the Bronx’s median home value for a single-family home of $435,800 and 20 percent down, your monthly mortgage payment would work out to $2,170. Annually, mortgage payments would absorb 71 percent of the median household income in the Bronx. Meanwhile, in Brooklyn, the annual mortgage for a median single-family home along the same parameters is $45,252, which takes up 86 percent of the borough’s median household income.
With housing costs eating up incomes in Brooklyn and Bronx, how much can residents realistically pay toward student loan debts — let alone other necessary expenses? Not a lot.
Using the 50/30/20 budgeting rule, ideally residents in both boroughs would allocate their incomes for the following:
|City||Annual Median Household Income||50% for Needs (housing, groceries, etc.)||30% for Wants (dining out, entertainment, etc.)||20% for Savings and Debt (student debt payments, retirement savings, etc.)|
But because housing costs take up more than 50 percent of incomes in Brooklyn and the Bronx, residents will have a hard time finding room in their budgets to allocate 20 percent to their savings and student loan debt payments.
Affordable NYC Neighborhoods for Student Loan Borrowers
If you’re still dealing with student debt, but want to remain in New York City and be a homeowner, there are areas where you can make it work. Search for New York neighborhoods where home prices are under $357,300, the maximum price someone with student loan debt can afford in the Big Apples.
According to Zillow’s January 2019 home price index, there are at least nine neighborhoods where the median list price is under $357,300. Five of them are located in the Bronx and four in Queens:
- Parkchester, Bronx: $180,000
- Morris Park, Bronx: $190,000
- Kingsbridge, Bronx: $280,000
- Soundview, Bronx: $294,000
- Concourse, Bronx: $295,000
- Briarwood, Queens: $302,000
- Kew Gardens, Queens: $310,000
- Oakland Gardens, Queens: $339,000
- Kew Gardens Hills, Queens: $341,000
So, it certainly is possible to live in the Big Apple and manage your student loan debt. It will, however, mean you’ll need to make some critical decisions on where you’d ideally like to live — and where you can feasibly live New York City.
Click through to see the best cities for aspiring millennial homeowners.
More on Real Estate and Student Loans
- The Average Student Loan Debt in Every State
- 13 Best First-Time Homebuyer Programs
- Yes, You Can Still Buy a House With Student Loan Debt — Here’s How
- Watch: Paying a Mortgage Is Cheaper Than Renting in These Cities
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Methodology: GOBankingRates found the cities where student debt makes buying a home more difficult by observing the 100 biggest cities in the U.S. and then identifying the average loan amount in each city, the median household income for each city and the median home value along with the monthly mortgage payment for each city assuming that you are paying a 20% monthly mortgage rate. We then annualized the monthly mortgage payment in order to see how much of the cities’ median income mortgage payments take up. Next, we scored each one of these categories individually with a lower score indicating a higher rank and a higher score indicating a lower rank. The cities ranked lowest are the ones where after covering mortgage payments, there’s almost no more money to left cover student debt. To compile the data, we used information from LendEDU and Zillow.