Fed Report Says Tuition Increases Hurt Later Homeownership

Let our journalists help you make sense of the noise: Subscribe to the Mother Jones Daily newsletter and get a recap of news that matters.

Zaid Jilani of the Intercept points me to an interesting Fed study on the effect of rising university tuition.  The authors make use of the fact that tuition has been rising at different rates in different states, and conclude that rising tuition has no effect on university enrollment. Young people continue to go to college at the same rate as always, and they rack up higher student debt to do it:

I assume this comes as no surprise to anyone. Next they compare tuition increases by state to homeownership rates six years later. Guess what?

As tuition and student debt go up, homeownership rates go down. The authors say that a $1,000 increase in college tuition and fees leads to a 0.24 percentage point decline in the homeownership rate for college students later in life (ages 28 to 30). Thus, the $3,578 increase in tuition from 2001 to 2009 is responsible for a decline of about 0.84 percentage points in homeownership rates among college students from 2009 to 2015. That’s about a tenth of the total decline.

A different analysis suggests the effect may be even bigger: 0.48 percentage points for each $1,000 increase in college tuition. That comes to 2.74 percentage points, which is about a third of the total decline in homeownership rates.

In other words, tuition increases can explain somewhere between a tenth and a third of the decline in homeownership among those with some college education. On net, this may not be a good deal for states:

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….These states, on average, can expect both weaker starter housing markets and more “boomeranging” adult children to follow. The evidence points to a final policy opportunity to stimulate youth homeownership over the long run: funding state higher education.

I suppose the next step would be to take these estimates and plug them into a model that projects state economic growth and tax receipts. That would tell us, on net, if tuition increases help or hurt state and local budgets.


Headshot of Editor in Chief of Mother Jones, Clara Jeffery

It sure feels that way to me, and here at Mother Jones, we’ve been thinking a lot about what journalism needs to do differently, and how we can have the biggest impact.

We kept coming back to one word: corruption. Democracy and the rule of law being undermined by those with wealth and power for their own gain. So we're launching an ambitious Mother Jones Corruption Project to do deep, time-intensive reporting on systemic corruption, and asking the MoJo community to help crowdfund it.

We aim to hire, build a team, and give them the time and space needed to understand how we got here and how we might get out. We want to dig into the forces and decisions that have allowed massive conflicts of interest, influence peddling, and win-at-all-costs politics to flourish.

It's unlike anything we've done, and we have seed funding to get started, but we're looking to raise $500,000 from readers by July when we'll be making key budgeting decisions—and the more resources we have by then, the deeper we can dig. If our plan sounds good to you, please help kickstart it with a tax-deductible donation today.

Thanks for reading—whether or not you can pitch in today, or ever, I'm glad you're with us.

Signed by Clara Jeffery

Clara Jeffery, Editor-in-Chief

payment methods

We Recommend