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I'd imagine this pattern would depend on locality. For example, I live in CT and went to school in RI. I chose to live at home to save taking out additional loans for room and board, but I wasn't really separated from campus life, or even college towns for that matter (My parents lived by an art school and a state college).

However, were I do to the same in an area with fewer educational institutions per sq. mile, I may not have had that experience.

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I agree. Let's take Boston as the extreme example of where one could choose a nearly "optimal" college while still living at home. Local availability of good education options coupled with the high cost of off-campus housing in the area probably makes the adverse selection bias I observed in Cleveland much weaker in Boston. In Ohio, off-campus housing is generally cheaper than living in a dorm room. However, I'm told that dorms are coveted at places like NYU because the universities effectively subsidize rents compared to market rates.

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