Why Even Wealthy Black Students Have More Student Loan Debt

It's not only a matter of income — there are also differences in how black families acquire wealth.

For white students, family wealth acts as a shield from the burden of student loan debt, allowing them to start off their careers steps ahead of their peers. But the same isn't true for wealthy black students, according to a new study in the journal Race and Social Problems.

In fact, it's at the top of the wealth spectrum that the disparity between white and black student debt levels is the highest, the study found — a sign that student loan debt could sharply destabilize the black middle class, giving young blacks higher risk without the reward of being able to shield their own children from debt.

The Dartmouth-funded study, "Young, Black, and (Still) In Debt," found that while white youth at the top of the wealth spectrum had much less debt than their low-income and middle-class counterparts, the same wasn't true for black students.

Specifically, white families with a net worth of $150,000 had half as much student loan debt as those with a net worth of zero. But there was no difference in debt between zero net-worth black families and those with $150,000 in wealth. "The racial disparity in debt increases across the wealth distribution, such that black adults from wealthier families are more indebted than their white peers, relative to black adults from less wealthy families," according to the report.

At the root of the disparities are differences not only in income, but also in how black and white families acquire wealth (which includes home equity, savings, and inheritance) and pass it on to their children, the study said. Wealthy white families tend to have the kinds of wealth that are easily liquidated and also easily passed among generations, like stocks, savings, and home equity (which can be accessed in the form of home equity loans, according to the study).

The wealthy black families in the study had only half of the financial assets and less equity in their homes — making them less able to pay down their own debts and contribute readily to their children's educations and living expenses. Though wealthy white families contributed, on average, $12,000 to their child's college educations, wealthy black families gave just $4,200.

The result, the study's authors said, is the possibility that student loan debt could scar the already "fragile" black middle class — forcing young black students to drop out of college at higher rates and making it more difficult for them to acquire their own wealth.

The study shows both "how racial wealth inequalities are created, but also how they are compounded intergenerationally," said Fenaba Addo, an assistant professor at the University of Wisconsin-Madison and one of the study's authors, in a release.

Looking beyond just wealthy families, the Race and Social Problems study also found that sharp gaps among all families that are able to send their children to college: the median net worth of white families in the study was $101,376, while for black families, it was $9,497. On the whole among all income brackets, black students have almost 70% more student loan debt than their white counterparts.

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