America's skyrocketing student loan debt may be keeping young people from moving out of their parents' homes.
There's "a clear positive correlation between a state’s student debt growth and the rate at which its twenty-five-year-olds live with their parents," according to a new report from the Federal Reserve Bank of New York, which analyzed what factors are to blame for keeping millennials living at home. While housing costs and a tough job market may also be fueling the trend, the dramatic rise in student debt being shouldered by college graduates was most closely associated with the rise of young people living with their parents.
The report compared parental co-residence rates for 25-year-olds from 2002-2003 to 2012-2013. Here's a GIF that shows rates rising over the last decade across the 48 contiguous states (darker shades of blue indicate a higher rate of 25-year-olds living at home):
As you can see, the situation has become a lot more common over the last 10 years.
"In 2003, between 20 and 30 percent of twenty-five-year-olds lived with their parents (using our measure) in twenty-five of the forty-eight states," according to the New York Fed. "By 2013, all forty-eight states had parental co-residence rates of more than 30 percent."
In Maine, Minnesota, New Hampshire and Vermont, the share of 25-year-olds living at home had grown by 20 percentage points over the 10 years.
One caveat of the data is that the New York Fed considered a person to be living with parents if he or she was "living with any individual who is at least fifteen years older." This older individual in some cases could be a grandparent, an aunt or uncle or some other older housemate, the report said.
The Fed compared three economic trends -- student debt, county unemployment rate and zip code housing price index -- to the overall growth in the percentage of 25-year-olds living with parents. As you can see in the following graphs, the nearly straight line showing the growth in student debt is most closely correlated with the line showing the share of young people living at home.
Looking more closely at the relationship between student debt and parental co-residence, the Fed researchers found that a $10,000 increase in student debt per graduate correlates with an increase of 2.9 percentage points in the rate of co-residence for 25-year-olds.
Forty million Americans now have student debt with an average balance of $29,000. And these numbers have climbed rapidly in recent years. Americans carry a total of $1.2 trillion in student debt -- up 84 percent since the recession.