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Financially Over-Extended: College Attendance as a Contributor to Foreclosures during the Great Recession

Sun, August 23, 8:30 to 10:10am, TBA

Abstract

From 2007 through 2011, the United States experienced an unprecedented wave of foreclosures. A broad consensus points to the preceding housing boom, fueled by risky subprime credit, and the subsequent collapse of the housing market as the primary causes of this “Great Recession.” We hypothesize that rising costs of college and increased enrollment may have also led to financial burdens for households with college-age children. In a period of financial insecurity, this may have placed many families at risk of mortgage default. We find evidence of college-related financial risk for middle- and high-income families: when the likelihood of college attendance among the 50th and 90th income percentiles increased within a commuting zone, that commuting zone also experienced an increase in the rate of foreclosures. Some households were financially overextended by college costs, putting them at greater risk of foreclosure as the economy contracted.

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