The Racial Wealth Gap and Higher Education Explained

• College-aged voters consider the racial wealth gap a critical issue plaguing society.
• The financial chasm between white households and Black households continues to widen.
• Black college grads earn less than white college grads and have higher student loan debt.
• Black and Latino/Hispanic students are also more likely than white students to choose lower-paying majors and attend for-profit colleges.

With the 2022 midterm elections coming up this fall, college students are paying close attention to the political landscape. One key issue that continues to plague our nation — and impact our colleges and universities — is America's racial wealth gap.

In fact, ahead of the 2020 elections, the racial wealth gap ranked second among economic issues college-age voters cared about most (trailing only healthcare).

How do the racial wealth gap and higher education intersect? And how might students make a difference at the voting booth?

What Is the Racial Wealth Gap?

In simplest terms, the racial wealth gap refers to the difference in wealth between white households and Black and Latino households.

Just how wide is this chasm? According to a U.S. Senate report, the average white family has nearly eight times the wealth of the average Black family.

Thomas Shapiro, professor of law and social policy at Brandeis University, believes the gap is even wider. He notes the median white family has about $171,000 in net wealth compared to $17,000 for Black families.

"That's a dime in wealth for every dollar of wealth that that typical white family has," Shapiro said in a Brookings Institute conversation.

This disparity has increased over time. Compared to 30 years ago, Black households with college graduates in their 30s have seen their wealth position relative to similar white households drop 86%.

As our nation continues to experience a racial reckoning, the wealth gap issue remains front and center.

"The United States had long held itself as a land of social mobility and opportunity," writes Rakeen Mabud in Forbes. "But without reckoning with our history and taking concrete steps to solve for the racial wealth gap, we are denying the American dream to millions of people across the country."

The Racial Wealth Gap and Higher Education

Long considered the great equalizer for all citizens, higher education hasn't exactly lived up to that promise.

While college enrollment rates for Black and Latino/Hispanic students have increased since 2000, they still trail those of white and Asian Americans. Likewise, 37% of white Americans and 58% of Asian Americans hold a bachelor's degree, while only 21% of Black and Latino Americans have a bachelor's degree.

Similarly, six-year graduation rates for Black (40%) and Latino/Hispanic (54%) students lag behind those for Asian (74%) and white (64%) students.

Yet even college completion doesn't shrink the wealth gap for Black and Latino/Hispanic families.

These families have a lower median family wealth than white families with the same education level. In 2019, the typical Black household with a bachelor's degree had less median wealth than a white household whose highest level of education was high school.

In other words, Black college graduates have less wealth on average than whites who didn't attend college.

Myriad factors contribute to this imbalance, but data points to the choice of major and career path as a determinant.

A January 2022 Burning Glass Institute study found that Black and Latino/Hispanic students disproportionately major in fields with lower potential earnings and have a higher likelihood of being underemployed after graduating.

The study noted more than 40% of Asian American graduates hold "good jobs," while that figure was 23% for Black graduates and 19% for Latino/Hispanic graduates.

Compounding the problem of underemployment and lower wages is the growing student loan debt crisis facing many college graduates of color.

Today, more than 84% of college-educated Black households in their 30s have student debt, compared with 35% three decades ago. That debt is a median of $44,000, up from $6,000. Only 53% of white graduates in that age bracket have student loan debt.

Those same Black households saw their incomes increase 7% over the past generation, while those of their white counterparts rose 13%.

"Not only are Black families pretty far behind, they've fallen further and further behind for millennials," Ana Hernández Kent, senior researcher at the Federal Reserve Bank of St. Louis's Institute for Economic Equity, told the Wall Street Journal.

A big factor in the debt burden being shouldered by Black college graduates is their overrepresentation at for-profit colleges.

Black students constitute 12% of the student population at private nonprofit colleges and 11% at public colleges, but they account for 29% at for-profit private colleges. Many of these are "predatory" institutions that charge high tuition, encourage students to take loans, and have low graduation rates. For-profit colleges account for half of all student loan defaults.

What's more, Black college graduates aren't as likely to benefit from intergenerational wealth transfer. In fact, they experience just the opposite, giving money to their parents and depleting their own wealth. White college graduates, by comparison, are more likely to receive money from their parents.

A recent report from the Joint Economic Committee Democrats notes Black households have experienced an 86% drop in their wealth position relative to their white peers in the last 30 years. Whereas Black families once held nearly half the net worth of white families, they now have one-tenth — even as Black college graduate rates have increased during that span.

As the racial wealth gap continues to widen, this vital issue promises to influence how students vote next fall.