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Correlation between education and wealth

The impact of today’s tough housing market will be felt in the years ahead as fewer children from middle-class households get on the ladder of economic success by going to college. That’s because for many middle-class households, the ability of their children to go to college, or go to a better college than they otherwise would, is directly linked to the wealth accrued in their home.

That’s the conclusion of a study just released by the Pew Charitable Trusts in which Cornell University researcher Michael Lovenheim looks at data from the 2001-2005 housing boom and finds a direct correlation between higher-education attainment and housing wealth for middle-class families.

“Higher education decisions are highly sensitive to fluctuations in family resources,” says the report, called Housing Wealth and Higher Education: Building a Foundation for Economic Mobility. “The model shows that low- and middle-income students whose families experienced increases in housing wealth just before reaching college age were more likely to attend college, more likely to attend higher-quality universities, and more likely to graduate.”

Unfortunately, there’s a negative flip side to that: “The recent housing bust and resulting decrease in wealth could negatively impact the post-secondary decisions of low- and middle-income families.”

Among the findings:

  • For every $10,000 of home equity gains, the likelihood of enrolling in college increases by 6 percentage points among families with incomes below $70,000.

  • The wealth generated by rising home values is estimated to increase college enrollment by 24 percent among low- and middle-income families.

  • Increased housing wealth raises the likelihood of college graduation by 9 percent, lifting it to 32 percent.

Source: National Association of Realtors

Dy Associates is an Oakland Real Estate company specializing in commercial, home and investment property in the Oakland and East Bay Area. We provide real estate services including buyer agent, seller agent, short sales, commercial and investment acquisitions, loan facilitation, hard money lending, financing assistance property management. Articles are provided as information only. We do not provide legal or general investment advice.

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