Going to College Isn’t Paying Off for Students of Color
It’s a truism few parents of high school seniors would refute: a college diploma is an economic investment as much as an intellectual one. Besides being a ticket to a middle-class lifestyle, the wisdom usually goes, a degree is an insurance policy against hard times.
Yet a report released this week by the Federal Reserve Bank of St. Louis shows that for minority college grads, the investment in higher education isn’t paying off like it should. And the bank’s analysis is just the latest data set to undermine the bedrock premise that education alone can help level the economic playing field between whites and minorities.
Although college grads across the board make more money than their less-educated peers, the report found that whites and Asians with four-year degrees not only tend to outearn their black and Latino counterparts but they also better withstood the impact of the Great Recession. “Based on two decades of detailed wealth data, we conclude that education does not, however, protect the wealth of all racial and ethnic groups equally,” the report’s authors wrote.
According to the study, white and Asian American families with four-year college degrees were more likely to have accumulated much more wealth over the longer term than their less-well-educated counterparts. Ditto for African American and Latino families, although their earnings and wealth were typically lower than those of whites and Asian Americans.
“This is certainly partially a story about intergenerational inequality,” S. Michael Gaddis, an associate professor of sociology and demography at Penn State University, wrote in an email to TakePart.
One factor: “Research shows that minority and low [socioeconomic status] students don’t attend the best possible colleges they could (based on grades, etc.) and that lack of the best degrees translates into a substantial workforce that is underutilized,” wrote Gaddis, who authored a study released in March that found minority students who attend elite schools such as Harvard don’t fare better in the job market compared with less-well-educated whites.
That’s troubling enough, but this latest report from the Federal Reserve Bank of St. Louis also concluded that Hispanic and black families headed by someone with a four-year college degree “typically fared significantly worse than Hispanic and black families without college degrees.” The authors found that “This was true both during the recent turbulent period (2007–2013) as well as during a two-decade span ending in 2013 (the most recent data available).”
This is explained in part by the fact that less-educated minority families had less to lose, on average, than their middle-class peers. But the report also noted that real estate was a factor: Better-educated African American and Latinos were more likely to own homes, and those homes tended to be their primary source of wealth, so when the housing market collapsed, their residences transformed from piggy banks into anchors.
“Declines in the average value of owner-occupied homes among college-educated Hispanic and black families between 2007 and 2013 were 45 percent and 51 percent, respectively,” said the report. “The average value of owner-occupied homes declined 25 percent among college-educated white families and increased 6 percent among college-educated Asian families.”
Maya Rockeymoore, head of Global Policy Solutions, a Washington, D.C.–based policy organization, said that statistic points to another issue minorities face but whites don’t: discrimination and subprime loans in the housing market, which many families use to finance college tuition.
“The evidence shows that the free market is not so free for blacks and Hispanics who were charged disproportionately higher rates compared to similarly situated whites for mortgage products, despite having high incomes and good credit,” Rockeymoore said.
As a result, she said, “this had a devastating impact on their ability to grow and protect their wealth” even before the market crash. “It’s a problem not just for individuals but for entire families of color over generations.”