Wealth, Race, and Higher Education: Behind the Making of IHEP’s Newest Research Series
Published Jul 10, 2025
Wealth disparities by race and ethnicity are a defining feature of the economic landscape of the United States. The median wealth of White households is nine times larger than the median wealth of Black households, five times larger than the median wealth of Hispanic households, and three times larger than the wealth of multiracial households. These differences significantly shape students’ college experiences and their opportunities after graduation. Yet the wealth differences are often hidden in higher education data.
Traditional metrics like income provide a snapshot, but do not fully capture the assets (or debts) students and families bring with them to college. As a result, real affordability challenges often go unmeasured and unaddressed.
To shed light on these issues, IHEP Senior Research Analyst Marián Vargas introduces our new series, Wealth, Race, and Higher Education. Using federal survey data, the first brief explores how intergenerational wealth transfers affect students’ ability to meet basic needs while enrolled. The second examines how college students’ ability to build wealth over time varies by race, ethnicity, and educational attainment. Together, the briefs illuminate the cyclical relationship between higher education and the racial wealth gap.
Q: What is the racial wealth gap, and what drives it?
A: The racial wealth gap refers to the unequal stratification of wealth across racial and ethnic groups. It stems from a long history of systemic injustices—such as slavery, colonization, redlining, discriminatory hiring, and predatory lending—that prevented Black, Latinx, Indigenous, and multiracial communities from building generational wealth, while enabling White families to accumulate and transfer assets across generations.
In higher education, these wealth gaps factor into how students pay for college, how much debt they take on, and what kinds of resources they can access during financial emergencies. These inequities are not the result of individual decisions. They are the product of policy choices that have compounded over time.
Q: How does considering wealth, in addition to income, provide a different understanding of students’ higher education opportunities and outcomes?
A: Income is the money one earns regularly, such as wages, salary, or passive income streams. For many families, income alone cannot cover college expenses, often pushing students to borrow. This financial strain can limit their ability to afford basic living expenses while pursuing their educational goals.
Wealth, often measured as net worth, includes the total value of an individual or family’s economic assets—including savings, investments, and home equity—minus debts and liabilities. It offers a more holistic view of a family’s financial security and stability than income alone, which can fluctuate substantially over time. For example, a family with high income but little wealth may still struggle to support a student through college during economic disruptions, like a job loss, because they lack the savings or assets to fall back on. Meanwhile, a middle-income family with high debt may need to allocate much of their income toward repayments, leaving limited funds available to support their children’s education.
Q: How should readers interpret parental financial support and what does the data reveal about wealth’s role during and after college?
A: Our first analysis uses the National Postsecondary Student Aid Study (NPSAS) from the National Center for Education Statistics (NCES) to examine how wealth transfers, measured through parental financial contributions, affect students’ experiences in four-year colleges. These contributions are not the same as wealth itself, but they offer a meaningful lens on how financial resources are passed between generations.
Parents draw on a range of sources to support their children in college: personal savings, home equity, credit cards, and private or federal loans like Parent PLUS. These approaches carry very different financial risks and long-term consequences, particularly for families with lower incomes and less generational wealth. Still, the presence or absence of parental support is a powerful indicator of the financial resources available to students due to wide disparities in the frequency and size of wealth transfers across racial and ethnic lines. Our research also finds these parental transfers are associated with students’ ability to afford college and meet basic needs. By examining parental contributions, we can surface important disparities.
Our second analysis leverages data from both the Beginning Postsecondary Students Longitudinal Study and the Baccalaureate and Beyond Longitudinal Study to explore students’ access to wealth-building opportunities post-college.
Q: What do we know about the racial wealth gap and higher education? How does wealth vary within racial and ethnic groups?
A: Students from wealthier families—who are disproportionately White—are much more likely to receive parental support for college, avoid debt, graduate on time, and enter financially secure careers.
Wealth and higher education are closely linked: greater wealth is associated with stronger higher education outcomes which, in turn, open doors to higher earnings and wealth accumulation. But these benefits are not automatic: students must complete a degree of value, and structural barriers like student loan debt and disparities in post-college job opportunities can lead to systemically lower wealth levels for certain student groups.
White households possess significantly more wealth, on average, than Black, Hispanic or Latino, and multiracial households and are much more likely to pass down assets such as real estate properties or businesses over generations. Asian American households have the highest median wealth overall, but there is wide variation within the group. For example, in some cases low-income Asian American households have less wealth than low-income White households. For American Indian or Alaska Native households, data limitations make it difficult to track wealth disparities accurately, but existing research shows that wealth levels are far below the national median.
Q: What do IHEP’s findings reveal about wealth, race, and higher education and what policies could help?
A: This series provides a deeper look at how wealth shapes students’ college experiences and their financial trajectories. Drawing on new analysis in two briefs, this research reveals patterns that align closely with students’ racial and ethnic backgrounds. The first brief investigates how the likelihood of receiving intergenerational wealth transfers—as well as the size of those transfers—shapes students’ food and housing insecurity during college and the second examines how educational attainment relates to building financial security and assets like home equity and retirement savings after leaving college.
Policymakers, institutions, and employers should take steps to ensure that higher education provides economic mobility to students and narrows, rather than perpetuates, racial wealth disparities. Those strategies include:
- Increased investment in need-based financial aid by protecting and increasing the federal Pell Grant, funding first-dollar free college programs at the state level, and expanding financial aid coverage for non-tuition expenses like food and housing, to help students afford the full cost of attendance and reduce the prevalence of food and housing insecurity.
- Strengthening completion supports like academic advising, mental health care, childcare, and emergency aid to keep students enrolled and on track to graduate, improving their ability to complete credentials of value and generating opportunities to build wealth after they leave college.
- Expanding opportunities to build wealth by providing strong career services that connect students to quality jobs and employers that offer wealth-building benefits like retirement plans, fair pay, and affordable healthcare.
Higher education alone cannot close the racial wealth gap, but it can be an engine for economic mobility, when designed equitably. With the right policies in place, postsecondary education can be part of the solution—helping students prepare for fulfilling careers, build financial security, and contribute to a more just society.
Explore our full Wealth, Race, and Higher Education series to learn more.
