Over the past two decades, there has been a significant change in the financing of higher education—with state and local funding covering a smaller share, and students and their families bearing a greater proportion of rising college costs. While the federal student loan program has undoubtedly helped mitigate the impact of higher costs on college enrollment, more students now leave college with higher amounts of debt. At the same time, college dropout rates remain stubbornly high, and empirical evidence indicates that graduates from some colleges have had trouble finding good-paying jobs. Another important question concerns the consequences of growing student debt for the overall economy. To investigate this question further, we linked our CCP dataset to student enrollment records from the National Student Clearinghouse in order to analyze the relationship between homeownership, educational attainment and student debt. Not surprisingly, our research shows a strong positive association between educational attainment and homeownership, consistent with the fact that higher educational attainment is associated with higher average earnings. Interestingly, this relationship appears to hold irrespective of family background, suggesting that colleges may be successful in “leveling the playing field” across students from different socioeconomic backgrounds. At the same time, our analysis reveals that those with significant student debt are much less likely to own a home at any given age than those who completed their education with little or no student debt.
William C Dudley: Household borrowing, student debt trends and homeownership Opening remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Economic Press Briefing on Household Borrowing, Student Debt Trends and Homeownership, Federal Reserve Bank of New York, New York City, 3 April 2017. * * * Andrew Haughwout, Joseph Tracy and Wilbert van der Klaauw assisted in preparing these remarks. Good morning, and welcome to the New York Fed’s Economic Press Briefing. Today, we will focus on recent developments in household borrowing, with special attention on student debt. As always, what I have to say reflects my own views and not necessarily those of the Federal Open Market Committee or the Federal Reserve System. Following a period of steady deleveraging that began during the Great Recession, households have gradually increased their borrowing during the past three years. Later this year, total household debt is expected to reach its previous peak, from the third quarter of 2008. Given past experience, one might wonder whether this level of indebtedness is sustainable or a reason for concern. Answering this question requires a fuller consideration of household balance sheets and a deeper analysis of who is indebted. The increase in liabilities in recent years has been accompanied by significant improvements in the value of assets held by households, due to strong growth in housing and stock prices. Moreover, household incomes have been rising at a moderate pace due to sturdy job gains and modest wage increases.