College Was Supposed to Close the Wealth Gap for Black Americans. The Opposite Happened.

College Was Supposed to Close the Wealth Gap for Black Americans. The Opposite Happened.

By Rachel Louise Ensign and Shane Shifflett—Aug. 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.

“Not only are Black families pretty far behind, they’ve fallen further and further behind for millennials,” said Ana Hernández Kent, a senior researcher at the Federal Reserve Bank of St. Louis’s Institute for Economic Equity. “It will be very difficult for these older Black millennials to build wealth.”

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.

The Journal’s analysis is based on the Federal Reserve’s Survey of Consumer Finances, which examines household wealth, and census data. The analysis sorted the data by age, race and educational attainment. The Journal pooled results from 1989, 1992 and 1995 and compared that with results from surveys conducted in 2016 and 2019 to capture a larger number of college-educated families in their 30s than participate in a single survey.

Kesha McKinney and her husband own their home and have Roth IRAs for their two young sons. They also limit their spending and hope to retire by 45.

“Our friends call us the rich ones,” said Ms. McKinney, who is 32 years old and works for the Detroit City Council.

Read more at the Wall Street Journal.

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