Paying for college can be a big financial burden for a family. And a new study shows those added costs of college tuition were connected to a higher likelihood of foreclosure during the economic downturn.
A new study published in the journal Demography found higher rates of foreclosure from 2006 to 2011 in places that had recently sent more children to college. Two sociologists, Peter Rich (Cornell University) and Jacob Faber (New York University) studied annual college attendance and home foreclosure changes in 305 U.S. metro areas that encompassed about 85 percent of the population.
In a specific area where college attendance increased, so did foreclosure rates one year later. Faber told The Washington Post that this finding implied “the strain of paying for college increased foreclosure risk.” Across the country, the study showed that a 1 percent rise in college attendance led to between 11,200 and 27,400 more foreclosures.
The study found this risk affected families across all income types – poor and non-poor. And while middle-income households had the highest increase in foreclosure risk, there were also higher rates among top-income households with kids in college.
In addition, the study’s authors said that college financial aid should be “more transparent, flexible, and comprehensive” to enable parents to view beforehand. Having a clear idea of what financial aid their child will receivecan help parents create an appropriate budget – and figure out what they can afford in the first place.
The authors also believe the study’s findings show that college prices have climbed past what many families can reasonably afford even with financial aid.
Rich said the study shows the need for policies to address risky mortgage lending in addition to other big expenses, like college, that can cause financial distress for households and lead to widespread economic crises.
As families plan to send kids off to college, it’s crucial to be realistic about what they can afford. Families can help cut their costs by filling out the Free Application for Federal Student Aid as early as possible and do what they can to maximize their financial aid. In addition to applying for grants and scholarships, parents and children might want to consider less costly colleges, and ones that offer good work-study programs, before taking out student loans to pay for college.
Author: Debbie Baratz
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