Sending kids to college can cost families their home

by Steve Randall08 Aug 2018

Families who send their children to college are at greater risk of losing their homes due to the increased financial burden.

This is particular evident during recessions according to an academic study of data in 305 US commuting markets in the lead-in to the Great Recession in the late 2000s.

The study by Jacob Faber of New York University and Peter Rich of Cornell University found that banks often foreclosed on the homes of families who were supporting children’s further education.

Taking note of unemployment rates, refinance mortgage debt, home prices, and the number of 19-year-olds living in these areas, they found that higher rates of families with children starting college correlated with a higher rate of foreclosures in the following year.

"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.

Household income was not the issue with the study, published in Springer's journal Demography found that the link persisted across income distribution.

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