The huge wealth gap in America is a source of great debate among pundits, but whatever the reasons for the serious problem, a standard assumption is that, at least personally, the wealth gap can be addressed by college.
One of the common assumptions in the world of education policy is that wealth inequality is effectively eliminated by college attendance. If you start out from a poor family but manage to graduate from college, you can enjoy a middle class income, and wealth, pretty much the same way as if you’d grown up middle class. College fixes inequality. Or, as U.S. Education Secretary Arne Duncan put it in 2011, “In America, education is still the great equalizer.”
It turns out it doesn’t really work so well for blacks and Hispanics. According to an article by Patricia Cohen in the New York Times:
College-educated blacks and Hispanics over all earn significantly more and are in a better position to accumulate wealth than blacks and Hispanics who do not get degrees. Graduates’ median family income in 2013 was at least twice as high, and their median family wealth (which includes resources like a home, car and retirement account) was 3.5 to 4 times greater than that of nongraduates.
But while these college grads had more assets, they suffered disproportionately during periods of financial trouble.
Pretty seriously, in fact:
From 1992 to 2013, the median net worth of blacks who finished college dropped nearly 56 percent (adjusted for inflation). By comparison, the median net worth of whites with college degrees rose about 86 percent over the same period, which included three recessions — including the severe downturn of 2007 through 2009, with its devastating effect on home prices in many parts of the country. Asian graduates did even better, gaining nearly 90 percent.
This suggests that blacks and Hispanics with college degrees may operate financially rather like working class white people. They do well enough when the economy is good (because everyone does better when the economy is booming) but don’t enjoy the real stability that comes through planning and investment.
The reason this is the case is a little uncertain, since the reasons people experience financial problems are complicated. (And everyone lost money in the Great Recession. Blacks and Hispanics just lost more.) As the article explains:
There is not a simple answer to explain why a college degree has failed to help safeguard the assets of many minority families. Persistent discrimination and the types of training and jobs minorities get have played a role. Another central factor is the heavy debt many blacks and Hispanics accumulate to achieve middle-class status.
Part of this has to do with the ruinous impact of subprime mortgages, which many, many minority families used to buy houses before 2008.
But the other reason for this is that minorities are likely to have bad college debt, too. Since they disproportionately come from lower-income families, and tend to attend colleges with poor financial aid packages, they also end up with higher student loan debt.
Among those with degrees, some 81 percent of blacks and 67 percent of Hispanics have student loan debt, only 65 percent of white graduates have debt. What’s more, some 27 percent of black bachelor’s degree holders have more than $30,500 worth of debt, while only 16 percent of white graduates are in that situation.
And that’s a huge problem for those trying to achieve financial stability.