CORPUS CHRISTI, Texas — Millions more Americans will likely soon have more buying power when it comes to home loans.
President Joe Biden announced his student loan forgiveness plan which could eliminate between $10,000 and $20,000 worth of college debt for those who are eligible.
Less debt not only means more relief but potentially more opportunities.
When someone visits the office of Elsa Davila, mortgage sales manager for Gateway Mortgage, hopeful for a home loan, there are three important factors she is checking:
A good credit score, employment history, and the buyer's debt-to-income ratio.
"That 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 coming in."
During this process, student loans play an important factor. Davila adds that even if the loans are in forbearance or you're not making a payment, it is still calculated into your debt. Which means it can lower your buying power when it's time to start looking for that perfect home.
"Absolutely. They come in here and say I only have a car payment, but they have $60,000 worth of student debt," Davila said. "It's not something you can just pay off or take away."
That's where student loan forgiveness comes into play. According to Maria Serna, assistant director of financial aid at TAMU-CC, the average Islander debt has gone down from $18,000 in 2018 to $14,000 in 2022.
"If your average debt is $14,000 and President Biden is forgiving up to $20,000, you can have all your loans forgiven. That is huge for our recent graduates especially," Serna said.
She added that they were able to lower the average debt over the past few years with 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 over 20 years on the interest alone and haven't even hit the principal amount yet.
"Taking away this $20,000 can take off the interest of someone who graduated in the '80s," Serna said. "Now those payments can finally start chipping away at the principal balance. I'm not exaggerating when I say this is lifechanging for so many people."
Serna said TAMU-CC is still well under the national average when it comes to college debt. They hope more people take advantage of their monthly loan workshops, which are also open to the community.
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