The New York Fed is apparently very interested in the effects of college costs on young Americans’ home buying. The central bank branch explored the topic of student loans leading to lower homeownership rates in April, but in July it looked at it from a different angle: how public university tuition costs relate to homeownership. The authors of the resulting research paper found that higher tuition charges contributed to between 11 percent and 35 percent of the decline in homeownership among 28-to-30-year-olds between the years 2007 and 2015. Here is how they arrived at these estimates and why it might matter to New York bankruptcy debtors and homeowners.
As is often the case, the Fed’s researchers relied on its Consumer Credit Panel (CCP), which depends on consumer data from Equifax. The authors tracked nine groups of Americans over time, one for each year beginning in 2007 and ending in 2015, and in all 50 states. They first set their sights on how college students responded to tuition increases at public universities, which was $3,600 on average and weighted by schools’ enrollments. Unsurprisingly, students did not drop out of school at higher rates but instead took on more debt, $1,600 on average among 24 year-olds.
The authors then compared the homeownership rates for young Americans in the years after the Great Recession to those of Americans who were 22 in 2001. The difference was 7.74 percent in 2009, and of that at least 11 percent can be attributable to additional student loan debt incurred by young Americans compared to the past. Overall, though, this accounts for about 0.8 percent of the homeownership rate, and even just for one cohort at that. That’s not much compared to the entire housing market, but on the high end, the study’s authors estimated that the impact of higher tuition and student debt on the housing market was 35 percent of the 7.74 percent difference, making it a bigger deal.
The New York Fed paper is here.
The authors were more concerned about policy implications of young people not entering the housing market, such as moving in with their parents or other relatives. Obviously, New York homeowners might experience it as a problem reselling their homes—though that’s rarely a problem in New York City. Meanwhile, insolvent debtors are much more likely to struggle with student-loan debt than mortgage debt. Consequently the New York bankruptcy options are more limited for them.
If you are encountering difficulties repaying mortgage debt or student loans, then talking to an experienced New York bankruptcy lawyer can help you assess your options. Chapter 7 bankruptcy can free up income for student loans and chapter 13 can give advantages to student-loan debtors as well.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.
