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Wealth, Race, and Higher Education

WEALTH, RACE, AND HIGHER EDUCATION OUTCOMES

HOW WEALTH SHAPES STUDENTS’ EXPERIENCES, OUTCOMES, AND SUCCESS IN COLLEGE AND BEYOND

Income is often used to measure access, financial need, and post-college outcomes in higher education—but is it the best metric for understanding college access and success?

Often, wealth offers a more holistic view of a family’s financial security and stability than income alone, providing resources to help them weather life’s economic shocks. Wealth disparities by race and ethnicity are also a defining feature of the economic landscape of the United States.

These differences shape students’ college experiences, while higher education, in turn, generates wealth-building opportunities after graduation including homeownership and access to employer-sponsored retirement accounts. Yet these patterns are often hidden in higher education data. Wealth, Race, and Higher Education, explores disparities in wealth transfers from parents by race and ethnicity, how these transfers relate to college experiences, and how higher education supports further wealth accumulation, contributing to persistent racial and ethnic inequities.

To more fully understand challenges that students from historically underrepresented backgrounds face, this series takes a deeper look at how wealth shapes students’ college experiences and their financial trajectories, as well as opportunities for building wealth after completing a degree. Our findings reveal deep inequities—and cyclical patterns—in college and beyond.

Behind the Making of IHEP’s Newest Research Series

This Q&A-style blog post introduces the Wealth, Race, and Higher Education series and answers key questions including:

What drives the racial wealth gap?

How does considering wealth provide a different understanding of student opportunities and outcomes?

What policies could aid in narrowing gaps in wealth, race, and higher education?

The answers shed light on the factors behind the racial wealth gap, how they influence postsecondary success, and ways to make higher education more affordable for all students.

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Fifty-six percent of Black students and 55 percent of American Indian or Alaska Native students receive no parental financial support to help with college costs or living expenses compared to just 30 percent of Asian students and 41 percent of White students.

How Access to Parental Financial Support Shapes Basic Needs Security

Understanding who receives parental financial support, and how that support shapes basic needs security, reveals the broader role of wealth in the college experience. This brief explores disparities in how much parental financial support students receive, and how those patterns vary by race and ethnicity. These differences reflect long-standing inequities in intergenerational wealth and shape students’ day-to-day experiences in college. The analysis also connects levels of parental support to basic needs security, showing that students with less access to family resources are more likely to face food insecurity and housing instability. These challenges disproportionately affect students from historically underrepresented backgrounds and persist even among students receiving similar levels of support. Together, these findings illuminate how unequal access to parental financial support can compound barriers to college completion and limit the economic returns of a degree.

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White and Asian American students who leave college without a degree or certificate report being able to cover a financial emergency at higher rates than Black, Native Hawaiian or Pacific Islander, and American Indian or Alaska Native students with an associate’s degree or certificate.

How Race and Ethnicity Shapes Post-College Wealth Building

While degree attainment is tied to better career opportunities, graduates of different backgrounds have varying levels of opportunity to grow their wealth. This brief explores the ties between educational attainment and key indicators of financial security such as emergency funds, employment-based retirement accounts, and home ownership. Our findings show that disparities in financial security persist across racial and ethnic lines even among students with similar credentials, underscoring that barriers to wealth remain persistent even after degree completion. For example, Black bachelor’s degree holders are less likely to have access to employer retirement plans or own homes than their White and Asian American peers. Likewise, American Indian or Alaska Native, Hispanic or Latino, and Native Hawaiian or Pacific Islander students consistently report lower rates of financial security, highlighting how unequal access to wealth-building mechanisms continues beyond graduation.

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Less than half of Black bachelor’s degree holders own a home compared to nearly two-thirds of White graduates.

Breaking the Cycle of Racial Wealth Inequities and Higher Education Outcomes

Our May 2024 report examines how wealth disparities shape college access, affordability, and success. While income differences matter, wealth has a profound impact on college outcomes, particularly for Black and Latinx students. While the median income for White households is nearly twice that of Black households, the median wealth for White households is a staggering 13 times larger. We find wealth significantly impacts college savings, enrollment, completion, and borrowing, shaping access to postsecondary opportunities for future generations. Stark disparities by race and ethnic group persist even among high-wealth households. The report offers a framework for understanding the cyclical relationship between wealth and higher education and offers actionable recommendations for policymakers and researchers to break the cycle and dismantle structural inequities so a postsecondary credential can serve as a pathway to wealth creation for all students.

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