It seems like common sense: Children from wealthier families tend to do better, while children from poorer families have a tougher time climbing the ladder. Today comes one piece of evidence showing exactly how precarious that ladder climb can be for families of modest means.
A new study from the Pew Charitable Trusts' Economic Mobility Project shows a correlation between the housing boom and education gains for students from low- and middle-income families. For prospective students from families making less than $70,000 per year, an increase in housing value immediately prior to college might mean more educational success. For every $10,000 gain in such a family's home equity, the likelihood of enrolling in college increased by 6 percent. In addition, the housing boom made these students 24 percent more likely to choose their states' four-year public flagship schools and 17 percent less likely to choose community colleges, and also 9 percent more likely to graduate from college.
At a time when ideas of inequality and what it takes to achieve the American dream permeate the national conversation in the U.S., the study suggests the extent to which even a modest change in fortunes can change the course of a student's education.
"To me the biggest takeaway from this report is the impact that family wealth does have on postsecondary college decisions," says Erin Currier, manager of the Economic Mobility Project.
In contrast to the low- and middle-income students represented in the study, Currier says, there was no significant correlation between home value and college attendance for families earning $70,000 or more.
As those postsecondary college decisions can make or break a person's lifetime earning potential, the study suggests the degree to which growing up with above-average means can lead to a lifetime of financial comfort. Conversely, then, barriers to education can effectively also be barriers to economic mobility.
"For students that start in the bottom fifth of the income ladder, a college degree quadruples their chances of making it to the top. That to me is the most amazing indicator of the power of education to give a family economic security and upward mobility," says currier.
Labor Department data shows that the unemployment rate drops off steeply with increasing levels of education. In November, the jobless rate for people with less than a high school education was 13.2 percent. For high school graduates, it was one third lower, at 8.8 percent, and for workers with bachelor's degrees, it was 4.4 percent—roughly half the national rate.
Evidence of the link between wealth and education may challenge basic assumptions about what it takes to climb the ladder in America. A Pew survey also shows that Americans believe that three of the four most important factors in whether a person gets ahead economically have to do with personal attitudes and ambition (hard work, personal drive and ambition, and attitudes and values taught by parents).
Respondents ranked the state of the economy, postsecondary education, and family stability behind these factors.
Yet when a housing market and job market remain stubbornly in the doldrums—beyond the control of not only average Americans but, it seems, even lawmakers—the study reinforces the idea that even the students tugging hardest on their own bootstraps can come up against insurmountable financial challenges in their educations.
As housing values are currently depressed, with no end in sight, the study suggests that the bursting of the housing bubble created—and is still creating—hardship for current potential college students. According to the study, home equity is estimated to have dipped by 54 percent between 2006 and 2010 for homeowners with less than $70,000 in annual income.
According to Currier, the study has implications for what policymakers can do to promote postsecondary education. To help students have access to college, federal spending doesn't have to be limited to educational initiatives, like Pell grants.