In my business as a property manager, I have the opportunity to witness first hand many economic issues as they are happening. Between 2003 and 2008, I saw tenants buying homes that should have never qualified for financing. I saw property values soaring to unheard of prices. I saw investors buying and selling properties inflating numbers with the help of loose financing deals.
When the economy hiccups, tenants lose jobs and can’t pay rent. When the economy tanks, they move out, break their lease, and move in with Mom and Dad.
Here is what I am seeing now: Nearly every applicant looking to rent has student loan debt. This wouldn’t be so scary if the debt was tied to an education that led to a professional career. But these don’t. These are loans taken out by people trying to advance in some field but they end up back in a low paying job. Even the few that get a career are not making enough to pay the loans back. Many couples have the double problem of both husband and wife strapped with this debt.
These are not small loan balances under $10,000. These are balances that average between $10,000 and $30,000. The highest loan balance that I have seen was $250,000! This person shared a townhouse with two other individuals that each had $125,000.
You may be asking at this point, are the people paying their loans back. Most of them are so current that the re-payment period hasn’t started yet. The loans all appear on the credit reports at “01” – top score because they are deferred. When the payments on these loans begin it will get ugly. From the budgets that I am seeing, there is no way that these families will be able to make the payments. Time will tell.
In 30 years of pulling credit applications, I have never seen such a dramatic across the board financial statement. If I were to deny applicants based on student loans my units would be virtually vacant.