Expert Commentary

How higher education affects wealth by race, ethnicity

2015 report from the Federal Reserve Bank of St. Louis looks at how higher education affects the ability of different racial groups to accumulate wealth and overcome financial hardship.


Many colleges and universities nationwide continue to come under increased pressure to justify the value of a college degree. In particular, more policymakers are pushing for accountability among public institutions and making funding decisions based at least partly on the employment rates and salaries of recent graduates.

A May 2015 study from the Georgetown University Center on Education and the Workforce suggests that college graduates earn $1 million more than high school graduates on average over the course of their careers. The report also states that college majors make a big difference — graduates with the highest-paying majors earn $3.4 million more than those with the lowest-paying majors.

An August 2015 study from the Federal Reserve Bank of St. Louis, titled “Why Didn’t Higher Education Protect Hispanic and Black Wealth?,” looks at how having a college degree affects a person’s income and ability to manage financial hardships such as an economic recession. Economist William R. Emmons and policy analyst Bryan J. Noeth, both of the St. Louis Federal Reserve, analyzed data from 1992 to 2013 to determine trends related to wealth and income among racial and ethnic groups.

Key findings include:

  • Regardless of race or ethnicity, college-educated families tended to have a significantly higher median net worth. The median net worth of families headed by someone with a four-year degree was 3.6 to 9.8 times larger than families headed by less-educated persons.
  • White and Asian families with four-year degrees withstood the recent recession better, and accumulated more wealth over the longer term, compared to whites and Asians without degrees.
  • Hispanic and black families with degrees typically fared “significantly worse” than those without degrees. College-educated Hispanic and black families experienced declines in wealth during and after the Great Recession.
  • In 2007 — on the eve of the recession — the median debt-to-income ratios of college-educated Hispanic and black families were larger than any other group. Debt-to-income ratios are an indicator of cash flow. The typical debt-to-income ratio of a college-educated Hispanic family was 100 percentage points higher than the typical debt-to-income ratio of a Hispanic family whose members had not graduated from college.
  • A college degree resulted in growth in median net worth among whites and Asians from 1992 to 2013. For a black or Hispanic family, higher education was associated with a reduced median net worth over that time period.

The authors suggest that further research is needed to understand why there are such disparities in wealth among racial and ethnic groups. “Evidence presented here suggests that college degrees alone do not provide short-term wealth protection, nor do they guarantee long-term wealth accumulation,” the authors state. “The underlying factors causing racial and ethnic wealth disparities undoubtedly are complex and deeply rooted.”

Related research: A 2014 study for National Bureau of Economic Research, “The Career Prospects of Overeducated Americans,” explores educational factors associated with employment and its effect on wages. Also a 2014 study from the Harvard Kennedy School and the College Board, “Initial College Choice and Degree Completion: Exploiting Variation in College Access Generated by Admissions Test Score Thresholds,” looks at testing, low-income students and the benefits of attending higher-quality universities.


Keywords: college access, graduation rates, income, salaries, household income, job placement, housing, bachelor’s degree

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