Ensuring A More Equitable Future: Exploring and Measuring the Relationship between Family Wealth, Education Debt, and Wealth Accumulation

empty lecture hall with empty desks

Wealth begets wealth, and this is perhaps most obvious when it comes to higher education in America.

Many of the most straightforward paths to wealth accumulation require the credentials and skills that postsecondary education provides; however, earning such degrees often comes at great financial cost. For many, especially those not coming from generational wealth, it results in student loan debt that weighs on individuals and families for years, even decades.

This report by Cook Center faculty affiliate Dr. Fenaba R. Addo explores the complex and cyclical relationship between family wealth, educational debt, and wealth accumulation–and the racial and ethnic disparities contained therein. It then provides a summary of the strengths and limitations of existing datasets and outlines what the ideal dataset for studying this relationship would look like.

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.
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