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Fed launches new article series; first issue focuses on student loans

The Federal Reserve Board announced last week that it was launching a new article series, Consumer & Community Context, that features original analysis about the financial conditions and experiences of consumers and communities, including traditionally underserved and economically vulnerable households and neighborhoods.

According to the Fed, the series is intended “to increase public understanding of the financial conditions and concerns of consumers and communities” and will be published periodically.  Through the series, the Fed seeks “to share insights and provide context for the complex economic and financial issues that affect individuals, communities, and the broader economy.”  Each issue will have a theme, with student loans the theme of the first issue.  The authors are described as employees of the Federal Reserve Board or the Federal Reserve System.

The title of the first article is “Can Student Loan Debt Explain Low Homeownership Rates for Young Adults?”  Its authors “estimate that roughly 20 percent of the decline in homeownership among young adults can be attributed to their increased student loan debts since 2005.”  Thus, the authors observe that although their estimates “suggest that increases in student loan debt are an important factor” in explaining the lower homeownership rates, such increases are “not the central cause of the decline.”

The authors also reference a forthcoming paper in which they find that “all else equal, increased student loan debt causes borrowers to be more likely to default on their student loan debt, which has a major adverse effect on their credit scores, thereby impacting their ability to qualify for a mortgage.”  They observe that this finding “has implications beyond home ownership” and call on policymakers to consider policies “that reduce the cost of tuition, such as greater state government investment in public institutions, and ease the burden of student loan payments, such as more expansive use  of income-drive repayment.”

The second article is titled “‘Rural Brain Drain’: Examining Millennial Migration Patterns and Student Loan Debt,” and looks at the relationship between student loan debt and individuals’ decisions to live in rural or urban areas.  The authors found that “individuals with student loan debt are less likely to remain in rural areas than those without it” and that “rural individuals who move to metro areas fare better than those who stay in rural areas across several financial and economic measures, including student loan delinquency rates and balance reduction.”  They observe that higher rates and amounts of student borrowing may be causing student loan debt to “play an increased role in the dynamics of urban-rural migration” in that “factors that previously drew individuals to rural areas may be outweighed by the desire or need for greater economic opportunity in urban centers.”  They suggest that researchers “could explore community development strategies that might create conditions that lead to more college graduates living in rural areas.”

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About this Author

Culhane, Ballard, Partner
Partner

John L. Culhane, Jr., is known for his work advising on interstate direct and indirect consumer and residential mortgage loan and leasing programs, through both traditional brick-and-mortar facilities and e-commerce. Before joining Ballard Spahr, Mr. Culhane was associate counsel with Mellon Bank, N.A.; associate counsel with Bank of America NT&SA; and senior attorney (section chief) with the National Credit Union Administration, the federal agency regulating federal credit unions.

Mr. Culhane addresses issues involving licensing,...

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