Housing Wealth and College Attendance

Posted on  

"Housing Wealth and College Attendance"

cash-wad 1

Via Annie Lowrey an amazing result from Cornell economist Michael Lovenheim (PDF) on housing equity and college attainment:

Consistent with the prediction that liquid housing wealth should most influence college enrollment, the estimates show housing equity changes had no effect on enrollment in the 1980s and little effect in the 1990s, but between 2000 and 2005, I find a $10,000 increase in housing equity in the 4-year period prior to a household’s child becoming of college-age increases the probability of college enrollment by 0.4 percentage points. This marginal effect translates into a 0.8 percent increase in college enrollment for each $10,000 increase in housing wealth. Since real average home equity rose by $57,965 between 2001 and 2005, my estimates imply a 4.6 percent increase in college attendance due to increased home equity over this time period. These estimates point to the importance of housing wealth in driving college enrollment post-2000.

Rationally speaking, getting a college education is a very smart investment even though college is expensive. Thus in principle you could imagine a world in which college tuition was financed exclusively through loans, which would then be repaid thanks to the college wage premium. But there’s all kinds of evidence that this is not how the world works and then 17-18 year-olds and their families—particular if we’re talking about family members who themselves haven’t gone to college—are very impacted by other kinds of short-term financial considerations. Moving to a system where we had higher taxes on the top 10-20 percent of the income spectrum (who, Bill Gates, LeBron James, and my dad aside are almost all college graduates) to finance freeish college education would probably produce a better outcome by simply clarifying to people that if they can do college-level work then it makes financial sense to go to college.

Tags:

« »

By clicking and submitting a comment I acknowledge the ThinkProgress Privacy Policy and agree to the ThinkProgress Terms of Use. I understand that my comments are also being governed by Facebook, Yahoo, AOL, or Hotmail’s Terms of Use and Privacy Policies as applicable, which can be found here.