Nav: Home

Families with college kids more likely to lose their home during recessions

August 07, 2018

In times of economic difficulties, having to pay a child through college could be a major reason for a family to lose their home. This is according to two US researchers, Jacob Faber of New York University and Peter Rich of Cornell University, in a study published in Springer's journal Demography. Their investigations show that during the Great Recession of the 2000s, banks often foreclosed on the homes of families who were supporting their children's further education. Faber and Rich therefore recommend that policymakers look for other ways to alleviate families' financial burdens in addition to curbing risky mortgages.

Between 2005 and 2011, 39.9 per cent of Americans between the ages of 18 and 24 attended a two or four-year college (11.1 per cent more than in 1985). Tuition fees also nearly doubled over the same period. Need-based grants and sliding-scale tuition adjustments have made college more accessible to many people, but families still must make a financial contribution. Parents often draw from savings, earnings, and loans to cover this, and some financial advisors are known to recommend that people borrow against their homes.

Faber and Rich evaluated annual college data and foreclosures from 2005 to 2011 among people living in 305 commuting zones in the US. Their sample covered 84.8 per cent of the total US population and included information from rural and urban counties. They analysed data about foreclosures and federal taxes in these zones, and took note of unemployment rates, refinance mortgage debt, home prices, and the number of 19-year-olds living in these areas.

Their findings show that a higher rate of families sending their children to college predicted a higher rate of foreclosures in the subsequent year. They also verified these findings by analyzing three independent datasets tracking individual households over time, each of which show a greater likelihood of foreclosure among households sending children to college. The results expose an unexplored role that higher education costs had on household financial risk during the 2000s.

"This may help explain why some families with children were more likely to experience foreclosure during this period than childless households - as shown in previous studies. Our findings do not suggest that households' decisions to send children to college were as consequential as housing or labor market dynamics in shaping the Great Recession, but it is important to understand all contributing factors, especially because the penalties of foreclosure can be substantial and lasting," says Faber.

The researchers found that the connection between college attendance and foreclosures persisted for families at all points in the income distribution, suggesting that both poor and nonpoor families have had difficulty supporting their children through college. The authors believe that financial aid for college should therefore be more transparent, flexible and comprehensive, to allow parents to see upfront what they should budget for when their child starts studying, even with the help of financial aid. Moreover, they argue, their findings show that college prices have soared beyond what many families can reasonably afford even with tuition offsets, supporting calls to further reign in the high cost of college access.

Rich explained: "Our study warrants policy attention not only to risky home lending, but also to other determinants of financial hazard--such as the cost of college attendance--that can overextend families and render us all vulnerable to future economic crises."
-end-
Reference: Faber, J.W. & Rich, P.M. (2018). Financially Overextended: College Attendance as a Contributor to Foreclosures During the Great Recession, Demography DOI: 10.1007/s13524-018-0702-7

Springer

Related Education Articles:

Education a top priority
Various studies have revealed that a majority of Western European populations support increased investment in education.
Dementia on the downslide, especially among people with more education
In a hopeful sign for the health of the nation's brains, the percentage of American seniors with dementia is dropping, a new study finds.
A vision for revamping neuroscience education
The expanding scope and growing number of tools used for neuroscience is moving beyond what is taught in traditional graduate programs, say leaders in American neuroscience education, funding, and policy.
Scientific education through films?
Magic swords, wands, cauldrons and cloaks of invisibility do not exist in reality.
What should be the role of computer games in education?
Game advocates are calling for a sweeping transformation of conventional education to replace traditional curricula with game-based instruction.
Up, up and away, in the name of science education
US researchers extol the virtues of high-altitude balloons for science education in a research paper published in the International Journal of Learning Technology.
Minorities underrepresented in US special education classrooms
Although minority children are frequently reported to be overrepresented in special education classrooms, a team of researchers suggests that minority children are less likely than otherwise similar white children to receive help for disabilities.
Accentuate the positive when it comes to nutrition education
If you want people to choose healthier foods, emphasize the positive, says a new Cornell University study.
How do students use video in higher education?
A new SAGE white paper out today reveals the types of educational videos that appeal to students and where they go to find them.

Related Education Reading:

Best Science Podcasts 2019

We have hand picked the best science podcasts for 2019. Sit back and enjoy new science podcasts updated daily from your favorite science news services and scientists.
Now Playing: TED Radio Hour

Changing The World
What does it take to change the world for the better? This hour, TED speakers explore ideas on activism—what motivates it, why it matters, and how each of us can make a difference. Guests include civil rights activist Ruby Sales, labor leader and civil rights activist Dolores Huerta, author Jeremy Heimans, "craftivist" Sarah Corbett, and designer and futurist Angela Oguntala.
Now Playing: Science for the People

#521 The Curious Life of Krill
Krill may be one of the most abundant forms of life on our planet... but it turns out we don't know that much about them. For a create that underpins a massive ocean ecosystem and lives in our oceans in massive numbers, they're surprisingly difficult to study. We sit down and shine some light on these underappreciated crustaceans with Stephen Nicol, Adjunct Professor at the University of Tasmania, Scientific Advisor to the Association of Responsible Krill Harvesting Companies, and author of the book "The Curious Life of Krill: A Conservation Story from the Bottom of the World".