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Title: Home Equity Credit and College Access: Evidence from Texas Home Lending Laws

Citation Type: Miscellaneous

Publication Year: 2014

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Abstract: This paper estimates how household college investment in Texas responded to a 2003 constitutional amendment that relaxed restrictions on home equity lending. First, I document how homeowning families can lower their college financing costs by relying on home equity lines of credit, rather than traditional federal student loans. Second, I exploit the fact that the amendment provides plausibly exogenous variation in household credit for homeowners in Texas but not renters and not homeowners in other states. By comparing outcomes between these groups, I show that when homeowners are allowed to take out home equity lines of credit, enrolled students in homeowning families exhibit yearly increases in college tuition and net price that amount to roughly $4,500 per line of credit. In the presence of capacity constraints, increases in homeowner enrollment at the top and at the bottom of the 4-year college quality hierarchy are offset by decreases in renter enrollment, and some renters forgo college altogether rather than choosing to attend a 2-year college. The availability of home equity financing thus widens existing gaps in college investment levels between homeowning and renting families. The increase in privately available credit also allows more selective Texas institutions to raise tuition prices by more than $2,300, simultaneously re-allocating institutional aid away from homeowning families toward renters.

Url: http://www.columbia.edu/~hbs2103/Harold_Stolper_-_Home_Equity_Draft_-_2014-09-07.pdf

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Authors: Stopler, Harold

Publisher: Columbia University

Data Collections: IPUMS CPS

Topics: Education, Housing and Segregation, Other

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