Did the Housing Bust Hurt College Enrollment?
The two biggest investments of many Americans’ lives are buying a home and sending their kids to college. For middle-class homeowners with kids approaching college, housing wealth is often their primary or only financial asset, and it not surprising that many of them look to their home values to help finance their children’s education.
This was especially common in the housing boom of the 2000’s. One researcher, Michael Lovenheim, studied this and found housing wealth affected college enrollment and college choice. This was especially true for those in families without many other resources, concluded Lovenheim and his co-author on the second paper, Lockwood Reynolds. While his analysis was too early to say much about the aftermath of the housing bust, his results suggest it may have made it a lot tougher for everyday Americans to go to college, which has repeatedly been shown to be a good human capital investment.
Recently, I attended the Panel Study of Income Dynamics Conference, and this question was on a few presenters’ minds. In 2013, the panel added a question to the survey asking about transfers between family members, including whether family members helped young adults pay for college. Joe Hotz of Duke University (who was my thesis advisor) and Tom Laidley of New York University presented separate work on this topic. While both presentations were of preliminary work, early results suggested the effect of the housing bust may have affected other things more than college enrollment.
The study by Hotz and his colleagues replicated the relationship between housing wealth and college enrollment during the boom previously found by Lovenheim, but they did not find a similar decline during the bust. However, they did find slight increases in debt and declines in consumption for parents whose children attended college.
Lindley’s results also found a link between housing wealth and college attendance. In contrast to Lovenheim’s work using other data, however, it suggested the link was strongest for children in more advantaged families, not less – those who might not have needed rising house values to finance college costs. Because their effects were smaller, this supports the notion that less wealthy youth’s college decisions might not have been greatly affected after the bust.
It was really enjoyable to see new data brought to bear on this important question. While still preliminary, I found these studies encouraging. It does not appear credit constraints due to the housing bust closed off college access for as many people as we might have suspected from behavior during the boom.
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