Homeowners Overextended With Kids’ College Costs

The wave of foreclosures during the Great Recession was blamed on rising unemployment and subprime loans. But a new research study by Jacob W. Faber and Peter M. Rich suggests the foreclosure fallout may have been from something more: Homeowners who overextended themselves financially by paying for their children’s college education.

“While the foreclosure literature has focused on subprime lending, unemployment, and housing prices as the primary sources of financial overextension, there has been little attention devoted to the cost of college, despite evidence that college is a source of financial stress,” the researchers write.