Many economic analysts are quick to agree that the economic crisis we’re still battling started in the housing market, and that no real recovery will occur until the real estate industry recovers. That analysis is troubling, given a recent report from Bloomberg Businessweek about the link between high levels of student debt and mortgage loans.

It seems that, even for those who earn enough to afford to buy a home (including one woman the article profiled who earns $125,000 per year), banks are largely unwilling to initiate mortgage loans when student debt is too high.

This may be because…

• Student loan debt cannot be discharged in bankruptcy. Even in Chapter 7 bankruptcy, which offers filers a discharge of most of their unsecured debts, student loans are notoriously difficult to eliminate.
• Mortgage lenders are more cautious than they were during the housing bubble. Because of the mayhem caused when the bubble burst, most mortgage lenders are much more selective now than they were a few years ago about initiating mortgage loans. In many ways, this is unsurprising: even those who have high-paying jobs right now may not have those jobs in a few years, when mortgage payments (and student loan payments) will still be due every month.
• While the bankruptcy court has remained strict about repaying student loans, many homeowners have simply abandoned their homes (and mortgages) in recent years when payments became too much. Because of the abuses that led up to the crash in the housing markets, bankruptcy judges have been much more understanding with these so-called “strategic defaults” than they might have been in the past. The stigma of walking away from a home, in other words, has been greatly diminished since the crash of the housing market.

Are Student Loans the Next Bubble?

Some analysts have argued that student loan debt will be the next bubble to burst, once again wreaking havoc on the American economy. Their argument is hard to ignore: since 2001, student loan debt in the U.S. has increased by 600 percent, compared to a less-than-200% increase for mortgage debt.

High levels of student debt, combined with a weakened job market (especially for young, fresh-out-of-college employees) mean that those massive student loans have become harder than ever to repay.

If the trend of withholding mortgage loans from those with high student debt—even when those borrowers earn enough money to otherwise qualify for a mortgage—the U.S. housing market could take much longer to recover than originally thought.

After all, a whole generation of first-time homebuyers might be shut out of the market as their student loans prevent them from getting the mortgage loans they need to make purchase real estate.