Student loans have often been cited as a major impediment preventing young homebuyers from achieving homeownership. But First American Financial Corp., analyzing data from the Federal Reserve’s Survey of Consumer Finances (SCF), has concluded that while student loans likely delay homeownership, it’s a stretch to say they’re preventing homeownership outright.

It’s true that the continuous growth of student loan debt has weighed heavily on younger generations of homebuyers. The latest available SCF data revealed that average student loan balances have, adjusted for inflation, ballooned from $12,600 in 1992 to $40,600 in 2022.

But notably, the percentage of income that young households dedicate to student loan repayments has actually dropped in recent years: The average payment-to income ratio for households with heads aged 25 to 34 dropped from 7.4% in 2016 to 5.9% to 2022. That’s because the average inflation-adjusted income for young households with student debt has grown from $73,000 in 1992 to $122,000 in 2022— a pickup of almost 70%. The average loan repayment term, meanwhile, has nearly doubled from 7.5 years in 1992 to 13.9 years in 2022.

“Just as extending a mortgage term from 15 to 30 years allows home buyers to borrow more money for a similar monthly payment, almost doubling the student loan repayment term accommodates more debt for a similar monthly payment,” said Sam Williamson, First American’s senior economist.

Meanwhile, student loan rates have also declined, with the average annual interest rate on student loans dropping from almost 8% in 1992 to about 6% in 2022.

Meanwhile, the correlation between the attainment of higher education and household income has held steady, boosting homebuying power. In 2022, for example, the gap in buying power between those with a bachelor’s degree and those with high school diploma was roughly $250,000 in 2022, adjusting for inflation. The homeownership rate among millennials with a bachelor’s degree, subsequently, was 12.8 percentage points higher than for those with just a high school diploma.

“Focusing on the increase of student loan debt levels overlooks the increase in education-buying power from longer loan repayment terms and lower student loan rates that frees up additional funds for young home buyers to put toward purchasing their first home,” Williamson said. “Based on our analysis, student loan debt more likely delays, rather than prevents homeownership. With stable payment-to-income ratios and the substantial return on investment from higher education, millennials – the most educated generation yet – are well positioned to drive homeownership demand, as more reach their prime home-buying years and continue to pursue the American Dream of homeownership.”