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Student Loans and Homeownership

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Abstract
We estimate the effect of student loan debt on subsequent homeownership in a uniquely constructed administrative dataset for a nationally representative cohort. We instrument for the amount of individual student debt using changes to the in-state tuition rate at public 4-year colleges in the student's home state. A $1,000 increase in student loan debt lowers the homeownership rate by about 1.5 percentage points for public 4-year college-goers during their mid 20s, equivalent to an average delay of 2.5 months in attaining homeownership. Validity tests suggest that the results are not confounded by local economic conditions or changes in educational outcomes.

Suggested Citation

  • Alvaro Mezza & Daniel R. Ringo & Shane M. Sherlund & Kamila Sommer, 2016. "Student Loans and Homeownership," Finance and Economics Discussion Series 2016-10, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2016-10
    DOI: 10.17016/FEDS.2016.010r1
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    References listed on IDEAS

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    1. Eric Bettinger & Oded Gurantz & Laura Kawano & Bruce Sacerdote, 2016. "The Long Run Impacts of Merit Aid: Evidence from California’s Cal Grant," NBER Working Papers 22347, National Bureau of Economic Research, Inc.
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    6. Adam Looney & Constantine Yannelis, 2015. "A Crisis in Student Loans? How Changes in the Characteristics of Borrowers and in the Institutions They Attended Contributed to Rising Loan Defaults," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(2 (Fall)), pages 1-89.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The Student Debt Crisis: Could It Slow the U.S. Economy?
      by ? in Knowledge@Wharton on 2018-10-22 20:03:33

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    Cited by:

    1. Cox, James C. & Kreisman, Daniel & Dynarski, Susan, 2020. "Designed to fail: Effects of the default option and information complexity on student loan repayment," Journal of Public Economics, Elsevier, vol. 192(C).
    2. Botsch, Matthew J. & Morris, Stephen D., 2021. "Job loss risk, expected mobility, and home ownership," Journal of Housing Economics, Elsevier, vol. 53(C).

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    More about this item

    Keywords

    Credit Constraints; Homeownership; Student loans;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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