Echoes of Rising Tuition in Students’ Borrowing, Educational Attainment, and Homeownership in Post-Recession America

50 Pages Posted: 17 Jul 2017

See all articles by Zachary Bleemer

Zachary Bleemer

University of California - Department of Economics

Meta Brown

Federal Reserve Bank of New York

Donghoon Lee

Federal Reserve Bank of New York; New York University

Katherine Strair

Federal Reserve Banks - Federal Reserve Bank of New York

Wilbert van der Klaauw

Federal Reserve Bank of New York; IZA

Date Written: 2017-07-01

Abstract

State average enrollment-weighted public college tuition and fees per school year rose by $3,843 (or 81 percent) between 2001 and 2009. How are recent cohorts absorbing this surge in college costs, and what effect is it having on their post-schooling consumption? Our analysis of tuition, educational attainment, and debt patterns for nine youth cohorts across all fifty states indicates that the tuition hike accounted for $1,628, or about 30 percent, of the increase in average student debt per capita among 24-year-olds between 2003 and 2011. However, estimates indicate no meaningful response to tuition on college enrollment, years of post-high school schooling, and BA degree attainment rates. Our findings are consistent with American youth having accommodated tuition shocks not by forgoing schooling, but instead by amassing more debt. They signal an active role for the U.S. student loan system in shielding young Americans’ human capital investments against shocks to (students’) education costs. Further analysis demonstrates that the tuition hike and student debt increase, despite leaving higher educational attainment unchanged, can explain between 11 and 35 percent of the observed approximate eight-percentage-point decline in homeownership for 28-to-30-year-olds over 2007-15 for these same nine cohorts. The results suggest that states that increase college costs for current student cohorts can expect to see a response not through a decline in workforce skills, but instead through weaker spending and wealth accumulation among young consumers in the years to come.

Keywords: homeownership, student loans, household formation

JEL Classification: D14, E24, R21

Suggested Citation

Bleemer, Zachary and Brown, Meta and Lee, Donghoon and Strair, Katherine and van der Klaauw, H. Wilbert, Echoes of Rising Tuition in Students’ Borrowing, Educational Attainment, and Homeownership in Post-Recession America (2017-07-01). FRB of NY Staff Report No. 820. Available at SSRN: https://ssrn.com/abstract=3003050

Zachary Bleemer (Contact Author)

University of California - Department of Economics ( email )

Berkeley, CA
United States

Meta Brown

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Donghoon Lee

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-8699 (Phone)
212-720-1844 (Fax)

New York University

NY
United States

Katherine Strair

Federal Reserve Banks - Federal Reserve Bank of New York

33 Liberty Street
New York, NY 10045
United States

H. Wilbert Van der Klaauw

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-5916 (Phone)
212-720-1844 (Fax)

IZA ( email )

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