A College Education Can Protect Wealth In Difficult Times, Unless You’re Black, Hispanic
Higher education doesn’t protect black and Hispanic students’ family wealth in periods of economic recession, a new report from the Federal Reserve Bank of St. Louis shows. The research found these groups’ wealth took a bigger hit than white and Asian students’ families did.
Although families headed by white and Asian people with four-year college degrees were able to weather the recession much better than their counterparts with less education attainment, black and Hispanic families headed by someone with the same degree actually did worse than black and Hispanic families headed by people without college degrees. The report found that this trend held true both in the long term and the short term. The authors, William Emmons and Bryan North, studied both the 2007 to 2013 period and the two decades ending in 2013.
Between 2007 and 2013, median real net worth fell 72 percent for Hispanic families with college degrees, but 41 percent for Hispanic families without degrees. For black families with college degrees, median wealth declined 60 percent compared to 37 percent for black families who hadn’t graduated college. Asian families with four-year college degrees actually gained 5.1 percent in median real net worth during that period, while less educated Asian families’ wealth declined 65.3 percent. For white families, the gap between college-educated and non-college-educated was less wide — the drop in wealth was 16 percent for families with degrees versus for 32 percent for families without them.
The report doesn’t delve far into all of the reasons why these inequities exist and said more work needs to be done to study the wealth gap, but it does point to debt as a major factor. The 2007 median debt-to-income ratios for college-educated Hispanic and black families were higher than those of white and Asian families. Research found a 140 percentage-point difference and 100 percentage-point gap in debt-to-income ratios for black college-educated families and Hispanic college-educated families compared to black and Hispanic families with less formal education. Home values also dropped more significantly for college-educated Hispanic and black families in that period than for college-educated white and Asian families.
Black and Hispanic people also have had higher unemployment rates historically compared to white and Asian people, making it more difficult to find employment even after graduation. The black unemployment rate is twice that of the white unemployment rate at 9.5 percent versus 4.6 percent. The Hispanic or Latino unemployment rate is 6.5 percent and the Asian unemployment rate is lower than the white employment rate, at 4 percent.
Black and Hispanic students are also more likely to attend for-profit colleges, which will likely make their employment prospects weaker and increase the amount of student debt they take on. For-profit colleges, which sell themselves as more flexible to working students, tend to have a larger percentage of students of color. According to a 2014 report from The Center for Responsible Lending, 28 percent of black students at enrolled in a four-year college attend a for-profit college compared to 10 percent of white students, and to a smaller extent, Hispanic students are more likely than white students to attend these schools.
For-profit colleges have come under fire for misleading job placement rates, poor quality of education and a pressure to take out loans from private lenders, many of which have engaged in questionable business practices. When looking at net price paid by students, for-profit schools are more expensive on average than their alternatives, even though employment outcomes are often very poor, according to the report. In addition, black and Latino students borrow more at for-profit colleges than they do at public colleges and private non-profit colleges while they are less likely to graduate at for-profit colleges compared to other colleges. As much as 80 percent of black students and two-thirds of Hispanic students did not complete their for-profit college programs.