Young, Black, and (Still) in the Red: Parental Wealth, Race, and Student Loan Debt

By Nicholas Brock

Examining racial differences in student-borrowing debt levels, a recent study details the debt burden young adults take on while pursuing postsecondary education. Using data from the National Longitudinal Study 1997 cohort (NLSY97), the study looks at differences in wealth, family background and postsecondary education attainment to explain racially stratified student-borrowing patterns. The report suggests that black young adults hold greater debt burden than whites and that racial disparity can also be seen in the differences in accumulation of debt and ability to repay.

Among some of the report’s findings:

• Average parental net worth is nearly four times higher for white students ($174,841) than for black students ($48,494) who were part of the NLSY97 cohort. These differences are even greater when looking at median net worth ($101,376 for white students vs. $9,497 for black students).
• These wealth differences can be observed across all types of wealth holdings, but are particularly pronounced for financial assets, home equity, retirement accounts and college savings account holdings.
• Among black youths, parents contributed an average of $4,200 towards the costs of attending college, compared to a contribution of nearly $12,000 for parents of white youths.
• On average, blacks report 68.2 % more debt than their white counterparts. In actual dollar amounts, if the average white young adult with debt owed $22,000, a comparable black young adult would owe $36,960, a difference of over $14,000.
• Once the researchers controlled for differences in postsecondary careers (and the salaries commensurate with different occupations), black young adults report 40 % more debt than white young adults after graduation.
• The study finds no significant difference in debt between a black family with zero net worth and a black family with $150,000 in net worth. For white families however, $150,000 net worth would lead to approximately 54% less debt than a white family with zero net worth.
  • This data indicates that parents’ wealth is associated with considerable reductions in student debt for white, but not black, young adults.