Young, Black, and (Still) in the Red: Parental Wealth, Race, and Student Loan Debt
- 2.2k Downloads
Taking out student loans to assist with the costs of postsecondary schooling in the US has become the norm in recent decades. The debt burden young adults acquire during the higher education process, however, is increasingly stratified with black young adults holding greater debt burden than whites. Using data from the NLSY 1997 cohort, we examine racial differences in student loan debt acquisition and parental net wealth as a predictor contributing to this growing divide. We have four main results. First, confirming prior research, black young adults have substantially more debt than their white counterparts. Second, we find that this difference is partially explained by differences in wealth, family background, postsecondary educational differences, and family contributions to college. Third, young adults’ net worth explain a portion of the black–white disparity in debt, suggesting that both differences in accumulation of debt and ability to repay debt in young adulthood explain racial disparities in debt. Fourth, the black–white disparity in debt is greatest at the highest levels of parents’ net worth. Our findings show that while social and economic experiences can help explain racial disparities in debt, the situation is more precarious for black youth, who are not protected by their parents’ wealth. This suggests that the increasing costs of higher education and corresponding rise in student loan debt are creating a new form of stratification for recent cohorts of young adults, and that student loan debt may be a new mechanism by which racial economic disparities are inherited across generations.
KeywordsParental wealth Race Student loans Wealth Young adulthood
This work was initiated while Fenaba Addo and Jason Houle were Robert Wood Johnson Foundation Health & Society Scholar at the University of Wisconsin-Madison. The authors thank the Robert Wood Johnson Foundation Health & Society Scholars Program for its financial support. This research was also generously funded by a grant from the Rockefeller Center at Dartmouth College.
- Allison, P. D. (2001). Missing data. Thousand Oaks, CA: Sage Publications.Google Scholar
- Bound, J., Lovenheim, M. F., & Turner, S. E. (2007). Understanding the decrease in college completion rates and the increased time to the baccalaureate degree. Ann Arbor: University of Michigan: Population Studies Center.Google Scholar
- Brown, M., Haughwout, A., Lee, D., & van der Klaauw, W. (2011). Do we know what we owe? A comparison of Borrower- and Lender-reported consumer debt. Federal Reserve Bank of New York Staff Reports, no. 253. Federal Reserve Bank of NY, New York.Google Scholar
- Bureau of Labor Statistics. (2009). Labor force statistics from the current population survey. Washington, D.C.: United States Department of Labor.Google Scholar
- Bureau of Labor Statistics. (2010). Updated CPI-U-RS, all items and all items less food and energy, 1978–2009. http://www.bls.gov/cpi/cpiurs1978_2009.pdf.
- Cellini, S. R., & Goldin, C. (2014). Does Federal student aid raise tuition? New evidence on for-profit colleges. American Economic Journal: Economic Policy, 6, 174–206.Google Scholar
- Choy, S. P., & Berker, A. M. (2003). How families of low-and middle-income undergraduates pay for college: Full-time dependent students in 1999–2000 Postsecondary Education Descriptive Analysis Reports. Washington, D.C.: National Center for Education Statistics.Google Scholar
- College Board. (2006). Trends in college pricing trends in higher education series. Washington, D.C.: The College Board.Google Scholar
- College Board. (2010a). Paying for college: Students from middle-income backgrounds trends in higher education series. New York: College Board Publications.Google Scholar
- College Board. (2010b). Trends in student aid trends in higher education series. Washington, D.C.: The College Board.Google Scholar
- Conley, D. (1999). Being black, living in the red: Race, wealth, and social policy in America. Berkeley, CA: University of California Press.Google Scholar
- Cunningham, A. F., & Santiago, D. A. (2008). Student aversion to borrowing: Who borrows and who doesn’t. Washington, D.C: The Institute for Higher Education Policy.Google Scholar
- Federal Reserve Bank of New York. (2013). Student loan debt by age group. Federal Reserve. https://www.newyorkfed.org/studentloandebt/index.html. Retrieved from December 7, 2015.
- Federal Reserve Board. (2010). G.19 Consumer Credit. Federal Reserve Statistical Release. http://www.federalreserve.gov/releases/g19/20100607/. Retrieved from May 10, 2011.
- Fitzpatrick, M., & Turner, S. E. (2007). Blurring the boundary: Changes in collegiate participation and the transtion to adulthood. In S. Danziger & C. E. Rouse (Eds.), The price of independence: The economics of early adulthood. New York: Russell Sage.Google Scholar
- Furstenberg, F. F., Kennedy, S., McLoyd, V. C., Rumbaut, R. G., & Settersten, R. A. (2004). Growing up is harder to do contexts, 3, 33–41.Google Scholar
- Huelsman, M. (2015). The debt divide: The racial and class bias behind the “new normal” of student borrowing. New York, NY: Demos.Google Scholar
- Integrated Postsecondary Education Data System. (2012). IPEDS analytics: Delta Cost Project Database.Google Scholar
- Johnson, A., Van Ostern, T., & White, A. (2012). The student debt crisis Washington. D.C.: Center for American Progress.Google Scholar
- Looney, A., & Yannelis, C. (2015). A crisis in student loans? How changes in the characteristics of borrowers and in the institutions they attended contributed to rising loan defaults brookings papers on economic activity. Washington, D.C.: Brookings.Google Scholar
- Nam, Y., Hamilton, D., Darity, W. A, Jr, & Price, A. E. (2015). Bootstraps are for black kids: Race, wealth, and the impact of intergenerational transfers on adult outcomes national asset scorecard for communities of color. Oakland, CA: Insight Center for Community Economic Development.Google Scholar
- National Center for Education Statistics. (2013). Average undergraduate tuition and fees and room and board rates charged for full-time students in degree granting Institutions. Washington, D.C.: Institute of Education Sciences.Google Scholar
- Oliver, M. L., & Shapiro, T. (2006). Black Wealth, white wealth: A new perspective on racial inequality. New York: Routledge.Google Scholar
- Project on Student Debt. (2011). Student debt and the class of 2010: The Institute for College Access and Success.Google Scholar
- Ratcliffe, C., & McKernan, S.-M. (2013). Forever in your debt: Who has student loan debt, and who’s worried?. Washington, D.C.: Urban Institute.Google Scholar
- Rodriguez, A. (2015). Understanding the Parent PLUS Loan debate in the context of black families. In D. Cunnigen & M. Bruce (Eds.), Race in the age of Obama: Part 2 (Research in Race and Ethnic Relations, Volume 19). United Kingdom: Emerald Publishing Group, Limited.Google Scholar
- Rothstein, J., & Rouse, C. E. (2008). Constrained after college: Student loans and early career decisions NBER Working Paper.Google Scholar
- Royston, P. (2005). Multiple imputation of missing values: Update of ice. Stata Journal, 5(4), 527–536.Google Scholar
- Ruch, R. S. (2001). Higher Ed, Inc.: The rice of the for-profit University. Baltimore, MD: John Hopkins University Press.Google Scholar
- Schoeni, R. F., & Ross, K. E. (2005). Material assistance from familiies during the transition to adulthood. In R. A. Settersten, F. F. Furstenberg, & R. G. Rumbaut (Eds.), On the frontier of adulthood: Theory, research, and public policy (pp. 396–416). Chicago: University of Chicago Press.CrossRefGoogle Scholar
- Shapiro, T. (2004). The hidden cost of being African American: How wealth perpetuates inequality. New York: Oxford University Press.Google Scholar
- Stewart, K. J., & Reed, S. B. (1999). Consumer Price Index research series using current methods, 1978–98. Monthly Labor Review, 122(6), 29–38.Google Scholar
- Tippett, R., Jones-DeWeever, A., Rockeymoore, M., Hamilton, D., & Darity, W. A, Jr. (2014). Beyond broke: Why Closing the racial wealth gap is a priority for national economic security. Washington, D.C.: Center for Global Policy Solutions.Google Scholar