Rachel Louise Ensign and Shane Shifflett, Wall Street Journal, August 7, 2021
Black millennials thought college would help them get ahead. Instead, it is setting them back.
The median net worth of households with Black college graduates in their 30s has plunged over the past three decades to less than one-tenth the net worth of their white counterparts, according to a Wall Street Journal analysis of Federal Reserve data. The drop is driven by skyrocketing student debt and sluggish income growth, which combine to make it difficult to build savings or buy a home. Now, the generation that hoped to close the racial wealth gap is finding it is only growing wider.
More than 84% of college-educated Black households in their 30s have student debt, up from 35% three decades ago, when many baby boomers were at the same age. The younger generation owes a median of $44,000, up from less than $6,000. By comparison, 53% of white college-educated households in their 30s have debt, up from 27% three decades earlier. The median amount rose to $35,000 from $8,000. All figures are adjusted for inflation.
Meanwhile, Black graduates’ household incomes have grown more slowly than those of college graduates in general, according to a Journal analysis of census data. Median income for Black college-educated households in their 30s increased 7% from the early 1990s to late 2010s to about $76,000. Income for their white counterparts rose 13% to about $114,000.
America’s racial wealth gap has persisted since the end of slavery. It has widened and narrowed over the years, but Black families have never managed to catch up to their white counterparts, making it difficult to pass substantial wealth down to the next generation. For decades, racist lending policies made it nearly impossible to get a mortgage in many areas, denying Black families the opportunity to build wealth through homeownership. The 2008 financial crisis hit Black communities disproportionately hard, further eroding Black wealth.
The median net worth for Black households with college graduates in their 30s has fallen to $8,200 from about $50,400 three decades ago, the analysis found. Over the same period, their white peers saw their median net worth grow 17% to $138,000. Net worth is calculated by subtracting a person’s liabilities, such as mortgage and college debt, from assets like homes and stockholdings.
College costs have soared in recent years, but Black students get less help from their parents to cover them. In 2012, 64% of white families contributed an average of nearly $73,400 toward their college-age children’s education, according to a study of nearly 3,000 households published by the St. Louis Fed. Just 34% of Black families assisted, at an average of $16,000.
Still, higher education has enabled Black graduates to reach top jobs in government and corporate America. While young Black graduates have less wealth than whites who didn’t attend college, they still make more money and have more wealth than Black young adults without college degrees—and they have more freedom to pursue careers in specific areas of interest.
Black households are less likely than white ones to own stocks, retirement accounts or homes, the traditional means for building long-term wealth in the U.S., according to 2018 research by Edward N. Wolff, an economics professor at New York University. About 41% of Black college-educated households in their 30s owned homes during the late 2010s, down from 43% in the early ‘90s and far less than the current 67% homeownership rate among white peers, according to a Journal analysis of census data.