Stafford looks at how housing market collapse affects college enrollment

A University of Michigan study will examine whether enrollment at colleges and universities will become the next economic casualty of subprime mortgages and high home foreclosure rates.

The Panel Study for Income Dynamics at UM’s Institute for Social Research sampled 745 families of young adults ages 18 to 20 in 2005, and found that 64 percent of the children of homeowners were enrolled in college, compared with 33 percent of the children of renters. Subprime mortgages generally began creating instability among secondary lenders due to default rates in 2006.

The study will begin a second phase starting next March, and examine how home foreclosures and falling home equity affected college enrollment, said Frank Stafford, a UM professor of economics and director of the panel study.

“Even in normal economic times (before housing collapsed), we can see that home ownership appears to be a significant tool that families use in their plans to finance college,” he said. “Without that tool, it’s possible they will turn now to part-time enrollment or work-study programs, or commute to college. That’s what we hope to determine.”

Home ownership remained one of the primary factors in college enrollment decisions even when controlling for educational attainment of a student’s parents, the initial study found. Stafford expects the post-subprime data collection will be complete in time for a follow-up report on enrollment trends in fall 2009.