St. Louis Fed: College Degree Affects Black, Hispanic Net Worth Differently than Whites, Asians


College degrees can help ensure economic survivability in periods of recession, but data shows that black and Hispanic families receive less financial protection from holding educational credentials.

A new report published by the Federal Reserve Bank of St. Louis shows that these two groups’ family wealth was affected more than white and Asian  families’ wealth was during the recent recession. Casey Quinlan, reporting for ThinkProgress, says that white and Asian families headed by people with four-year college degrees were able to get through the recession much more easily than their counterparts with less education, but black and Hispanic families headed by people with the same qualifications, actually did worse than black and Hispanic families headed by people without college degrees.

The authors of the study, William Emmons and Bryan North, studied both the 2007 to 2013 period and the two decades ending in 2013. For Hispanic families with college degrees, their median real net worth fell 72%, between 2007 and 2013, but fell just 41% for Hispanic families without degrees. Black families with college degrees saw their median wealth decline by 60% compared to black families who had not graduated from college, who saw a 37% decline.

Asian families with four-year degrees gained 5.1% in median real net worth during that same period of time, while Asian families who were less educated saw their wealth decline by 65.3%. For white families, the gap between college-educated and non-college-educated heads of families was not as wide. Wealth dropped 16% for families with degrees and 32% for those without them.

The report does not cover all the possible reasons for these inequities, and it stated that more work would have to be done in order to study the wealth gap further, but it does suggest that debt may be a major factor. The median debt-to-income ratios for Hispanics who were college-educated, and black families who were the same, were higher than the debt-to-income ratios of white and Asian families.

The research showed that there was a 140 percentage-point difference and a 100 percentage-point gap in debt-to-income ratios for Hispanic college-educated families and black college-educated families compared to black and Hispanic families with less education. Also, it was found that home values dropped more for college-educated Hispanics and black families in that time period than for college-educated white and Asian families.

Unemployment rates were part of the picture as well. Black and Hispanic populations have higher unemployment rates historically than whites and Asians to the extent that it is more difficult to find employment even after graduation for Hispanics and blacks.

“The long-term trend is shockingly clear,” said  Emmons. “White and Asian college grads do much better than their counterparts without college, while college-grad Hispanics and blacks do much worse proportionately.”

The study’s conclusion, writes Patricia Cohen of The New York Times, is that “higher education alone cannot level the playing field.” There is no concrete answer to explain why college degrees have not helped minority families protect their financial security. The pat answers are persistent discrimination and the types of training and jobs that minorities receive, but there is also the fact that blacks and Hispanics have heavy debt accrued during their efforts to achieve middle-class status.

Also, Hispanics and blacks have more of their wealth invested in their homes, while whites and Asians, for the most part, have assets in stocks and bonds, most notably through retirement funds.

Blacks and Hispanics are less likely to inherit money or receive help from their parents than are whites, says William A. Darity Jr., a professor of public policy at the Samuel DuBois Cook Center on Social Equity at Duke University.

“Prior family wealth is the key,” Mr. Darity explained in an email, noting that it “shapes both income-generating opportunities and the capacity to allow wealth to grow more wealth.”