College Tuition

Why do colleges keep raising the tuition rates for students, who are already taking out massive loans to pay for their education. These universities aren’t full of dummies, they know how economics work, yet they still raise their prices despite burdening their customers and hurting the economy. One of the most major ways it’s hurting the economy is preventing young graduates from buying a home. 

The Federal Reserve Bank of New York published their research and it’s the first to quantify the impact of recent rate hikes in colleges. Since 2009, we have seen student debt Double to more than $1.4 trillion; and homeownership is declining from young Americans 28-30.  The news about this will impact the economy because paychecks aren’t large enough to cover the expenses. When people buy a home, it’s almost guaranteed they will continue to spend, and spend big on things like furniture, tools, appliances, etc. It’s not hard to see that the drop in home buying is affecting the economy in other ways. 

35% of the drop in homeownership by young Americans from 2007 to 2015 is largely due to higher student loan debt. The study surveyed the entire sample size of 28-30 year-olds despite if they forfeited a college education, and suggested that the drop in home buying from this demographic is likely even greater. 

hey study also suggests that if tuition rates had stayed where they were in 2001, more than 360,000 young people would be homeowners in 2015. That would've made the total roughly 2.9 million 28-30 year-olds owning a home. Keep in mind this does not take count for other millennial's who are outside the age range also crippled by student debt. 

More than likely the total number of millennial's opting out of buying a home has grown since the period the economist studied. What's really fascinating is that since the constant yearly increase of raising tuition student debt has prison 13% every year, and the graduating class has more debt than the one before it. 

They are not sure, but confident that the consequences of keeping the younger generations from buying homes will echo throughout the economy for years. Purchasing property is one of the major ways people build wealth, and without these generations buying homes, they're missing out on gaining wealth. Historically, the US economy has relied heavily on household spending for nearly 70% of its growth. 

In essence the study found that rising college tuition didn’t scare kids away from college, but only made them borrow more. By itself, tuition rates rising were responsible for 11% of the decline in homeownership among young Americans. 

When colleges hike up the tuition they are asking for a weaker housing market, as young kids will be more inclined to stay with their mom and dad for several years after graduation. 

Entities like the Fed, US Treasury Department, financial regulators, and bank executives have been warning since 2013. When these entities warned about this, Obama economists dismissed all claims. Thanks Obama.

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