Wealth, Race, and Higher Education: Differences by Race and Ethnicity in Post-College Wealth Building

Wealth influences all aspects of students’ higher education journeys, from financial security while enrolled to college savings, enrollment, borrowing, and completion. At the same time, earning a degree is a key driver of long-term financial stability and can increase access to wealth-building tools post-graduation. 

This analysis draws on two nationally representative studies from the National Center for Education Statistics (NCES) to explore the connections between educational attainment and key indicators of financial security and wealth building. 

We assess financial security using student responses from the 2012/17 Beginning Postsecondary Students Longitudinal Study (BPS), which asked whether students anticipate they could cover an unexpected $2,000 expense six years after starting college, regardless of degree completion. To measure pathways to wealth-building, we use data from the 2008/2018 Baccalaureate and Beyond Longitudinal Student Study (B&B) to analyze access to employer-based retirement accounts and homeownership among bachelor’s degree recipients ten years after graduation. See Additional Data and Methodology Notes for more details. 

Our findings show that race and ethnicity can, at times, have a stronger influence on future financial security than education alone. Even among students with similar degrees, access to wealth-building tools like homeownership and employer-based retirement accounts remains unequal.  Black bachelor’s degree recipients face the lowest access to both compared to other racial and ethnic groups.  

How Does the Ability to Cover Emergency Expenses Vary by Race, Ethnicity, and College Attainment?  

The ability to cover an unexpected expense—like a $2,000 emergency— is a critical indicator of financial security.  As shown in Figure 1, six years after starting college students with at least a bachelor’s degree are far more likely to report having the resources to cover such an unexpected expense—by as much as 35 percentage points—compared to peers of the same race or ethnicity with only an associate’s degree,  certificate, or some college but no degree.  

However, even with similar levels of educational attainment, there are large differences in financial security by race and ethnicity. Black students in most cases report the lowest rates of being able to cover an emergency expense, while White and Asian American students typically have the highest rates.  

These disparities are so pronounced that White students who leave college without a degree or certificate report being able to cover a financial emergency at higher rates than Black, NHPI, AI/AN, and Asian American students with an associate’s degree or certificate. Asian American students with some college but no degree report being able to cover emergency expenses at about the same rate as Black bachelor’s degree recipients.   

Students who identify as American Indian or Alaska Native (AI/AN), Black, Hispanic or Latino, and Native Hawaiian or Pacific Islander (NHPI) often report less financial security six years after starting college, compared to White and Asian American peers with the same attainment level.   

How Does Access to Employer-Based Retirement Accounts Vary by Race and Ethnicity Among Bachelor’s Degree Holders?  

Employer-based retirement accounts are one of the most accessible and effective mechanisms for building wealth. These plans, such as 401(k) and 403(b) accounts, allow employees to invest pre-tax earnings, benefit from compound interest over time, and often receive matching contributions from their employers.  

Ten years after leaving college, most bachelor’s degree holders report having access to employer-based retirement accounts. However, as shown in Figure 2, access varies by race and ethnicity. White and Asian American bachelor’s degree recipients are more likely to have employer-based retirement accounts compared to Black, AI/AN, Hispanic or Latino, and NHPI graduates. 

These disparities point to differences not only in job quality and benefits, but in the broader structural barriers that shape post-college opportunities. 

How Do Home Ownership Rates Vary by Race and Ethnicity Among Bachelor’s Degree Holders?

Homeownership is another important avenue for wealth-building. As homeowners pay down their mortgage, they build equity—a form of wealth that renters do not accumulate. Homeownership can also shield individuals from rising rent prices, even as the cost of renting or purchasing a home in the United States continues to go up. A home is often the most valuable asset many families own and provides further benefits in the form of certain tax advantages only available to homeowners.  

As shown in Figure 3, our analysis finds that ten years after graduation most bachelor’s degree holders own a home outright or pay a mortgage—except Black graduates. Fewer than half of Black bachelor’s degree recipients own homes and 45 percent report paying rent. In comparison, nearly two-thirds of White graduates own homes and less than one third report paying rent. These gaps matter. Home equity is a primary source of wealth passed from one generation to the next. Limited access to homeownership among Black, AI/AN, and Hispanic or Latino individuals has lasting implications for intergenerational wealth and economic mobility. 

What Can Colleges and Policymakers Do to Ensure Higher Education Delivers on its Promise of Economic Mobility?  

Earning a postsecondary degree opens doors to higher wages, wealth-building mechanisms, and economic mobility. This research, along with our companion brief on parental financial support and basic needs security, underscores the importance of understanding how race, ethnicity, and family wealth shape students’ experiences before, during, and after college.  

A more comprehensive approach is needed to support all students at every step of their college journey and ensure higher education delivers on its promise of economic mobility.  

Colleges should start by designing recruitment, outreach, and admissions policies that better reach students from low-income and low-wealth backgrounds. Institutions, along with state and federal policymakers, must prioritize college completion, by increasing college affordability, reducing the need for student loan borrowing, and expanding wrap-around services—such as tutoring, counseling, emergency aid, and childcare—which are proven supports that help students persist towards graduation. Colleges should provide strong career services to help connect students to jobs and employers with wealth-building benefits like retirement plans and healthcare. 

Together, these efforts can help close wealth gaps and ensure higher education advances racial and economic equity.  

Explore our full Wealth, Race, and Higher Education series to learn more.  

Acknowledgements 

We would like to thank the individuals and organizations who helped develop this brief, including Mamie Voight, IHEP president; Diane Cheng, vice president of research and policy; Kelly Leon, vice president of communications & government affairs; Lauren Bell, communications manager; Sydney Carroll, communications intern, and Michael Tidwell, research intern. We also thank openbox9 for creative design and layout.  

All ideas, findings, and conclusions drawn by this report are the sole responsibility of the report’s authors. 

Additional Data and Methodology Notes 

This brief draws on two nationally representative datasets. Financial security is assessed using the 2012/17 Beginning Postsecondary Students Longitudinal Study (BPS:12/17), which asked whether respondents come up with $2,000, from any available source, within the next month.  

Post-college wealth-building mechanisms, retirement and homeownership, are measured using the 2008/18 Baccalaureate and Beyond Longitudinal Study ( B&B:08/18), which follows bachelor’s degree recipients for ten years after graduation. The employer-based retirement account measure includes retirement accounts such as 401(k), 403(b), and pensions. The homeownership measure captures whether the respondent owns a home outright, has a mortgage, pays rent, neither owns a home nor pays rent, or both owns a home and pays rent.  

As in our companion brief, we use binary race and ethnicity variables, meaning individuals who identify with more than one race or ethnicity are included in each relevant category rather than grouping all multiracial or multiethnic students in a “two or more races” category. This inclusive approach improves the precision of estimates for racial and ethnic groups, due to larger sample sizes, and better allows for the inclusion of underrepresented groups in research findings. 

When a data point has a standard error that exceeds 30 percent of its value, it is displayed in figures with an asterisk but not highlighted in the text. 

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