Education Matters US

Are School Districts to Blame For the Mortgage Crisis? This is a very interesting question and explored by Robert Frank in his article DOn’t Blame All Borrowers. [Emphasis mine]

It’s easy to see why. Even in the 1950s, one of the highest priorities of most parents was to send their children to the best possible schools. Because the labor market has grown more competitive, this goal now looms even larger. It is no surprise that two-income families would choose to spend much of their extra income on better education. And because the best schools are in the most expensive neighborhoods, the imperative was clear: To gain access to the best possible public school, you had to purchase the most expensive house you could afford.

But what works for any individual family does not work for society as a whole. The problem is that a “good” school is a relative concept: It is one that is better than other schools in the same area. When we all bid for houses in better school districts, we merely bid up the prices of those houses.

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The result was a painful dilemma for any family determined not to borrow beyond its means. No one would fault a middle-income family for aspiring to send its children to schools of at least average quality. (How could a family aspire to less?) But if a family stood by while others exploited more liberal credit terms, it would consign its children to below-average schools. Even financially conservative families might have reluctantly concluded that their best option was to borrow up.
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Yet millions of families got into financial trouble simply because they understood that life is graded on the curve. The best jobs go to graduates from the best colleges, and because only the best-prepared students are accepted to those colleges, it is quixotic to expect parents to bypass an opportunity to send their children to the best elementary and secondary schools they can. The financial deregulation that enabled them to bid ever larger amounts for houses in the best school districts essentially guaranteed a housing bubble that would leave millions of families dangerously overextended.

So, like I’ve said many times, start funding the child so the parents can choose the best school for their children. This way they would not have to overextend themselves to get into what they think is a “good” school. This new found competition would also make every school better in the realities of having to compete for the trust of the parents and the students money. We can now fix both the public schools and the housing bubble at the same time.
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