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Housing Bust Might See Fewer College Kids

September 15, 2011 by  

CHICAGO, Sept. 15 (UPI) — A U.S. study has suggested an unexpected consequence of the recession’s housing bust: lower college attendance caused by lower home equity levels.

As home values skyrocketed in the late 1990s and early 2000s, Cornell University economist Michael Lovenheim said, many families borrowed against that new equity to send their children to college, increasing overall college attendance nationwide.

But as home values plummeted in the recession, families had less equity available, resulting in fewer students heading to college, the study published in the Journal of Labor Economics said.

That could be especially true for kids from middle and lower income households, Lovenheim says.

“Housing prices grew dramatically in the 1990s, but they didn’t do so evenly across cities,” Lovenheim said. “For example, housing prices in San Francisco increased six-fold during the housing boom, whereas in places like Oklahoma City, prices barely doubled.”

Lovenheim said he found a strong correlation between home prices and college attendance.

Each $10,000 in home equity increases the likelihood of a student enrolling in college by 1.37 percent, he said.

“Because home equity increased by an average of nearly $60,000 between 2001 and 2005, this marginal effect leads to sizable changes in college enrollment due to the housing boom,” Lovenheim said.

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