"States that increase the cost of education therefore may pay a price not in the form of declining workforce skill, but instead through muted housing-related spending and lower wealth accumulation among younger consumers in the years to come," the New York Fed paper states. States that hike tuition the most can expect weaker housing markets and more adult children living with mom and dad in future years.
It's a scenario the U.S. Treasury Department, the Federal Reserve in Washington, financial regulators, and prominent bank chief executives have been warning about since at least 2013.
Previous research, particularly by the New York Fed, had suggested an association between rising student debt loads and lower homeownership. But those findings had been criticized by Obama White House economists, academics, and others who either said there was no causal link, or if there was one it was "at most, a small fraction of the decline," and that college would help most people afford homes and feed the economy.
In fact, most recent college students are struggling with their loans, according to the New York Fed. More than half of students who left college in 2009 had either defaulted, missed at least four months of required payments, or were facing higher loan balances five years later.
This article was provided by Bloomberg News.