Authors: Fenaba R. Addo
Abstract: The economic value students derive from postsecondary education relies on both earnings and wealth outcomes. And while sufficient earnings can create economic stability, wealth—which is the total value of assets (what one owns) minus total value of liabilities or debts (what one owes)—is key to the security necessary to withstand life’s financial shocks, including the health crises and job losses much of the nation is experiencing as a result of the coronavirus pandemic.i,ii Postsecondary education has a direct impact on students’ ability to build wealth (e.g., housing or retirement savings, investments, businesses, and investment farms and real estate) through the earning power associated with credentials and through student loan debt, or negative wealth, that many students rely on to finance their education. Historic wealth inequality resulting from centuries of racist policies in the United States heightens the need to focus on wealth outcomes in the context of defining and measuring how institutions of higher education deliver—or fail to deliver—equitable value to Black, Latinx, Indigenous, underrepresented Asian American and Pacific Islander (AAPI), low-income, and female students. This paper explores the complex and cyclical relationship between family wealth, educational debt, and wealth accumulation, with a special focus on racial/ethnic disparities in student loan debt burdens and negative repayment outcomes such as default. It then discusses both the ideal dataset for fully understanding this relationship in the context of the Postsecondary Value Commission’s Value Framework as well as public data that are currently available and their limitations.
Key Findings
- Despite having fewer financial resources Black families are more likely to assist their children with higher education expenses (Nam et al., 2015).
- $53,000 in education debt translates to more than $200,000 in lost lifetime net worth because borrowers accumulate less retirement savings and home equity (Hiltonsmith, 2017).
- Even with the attainment of a college education, Black Americans tend to view their middle-class attainment as temporary and stressful.
- Following a credit default, Black borrowers may be unable to access credit or be required to pay more to borrow, exacerbating racial/ethnic gaps in wealth accumulation.
- Better data, more nuanced research, and a more racially and ethnically diverse set of researchers are required to better completely understand the myriad relationships between wealth and postsecondary education.
