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What is an explanation for the racial disparities in student loan debt?

From Parents’ Wealth Helps Explain Racial Disparities in Student Loan Debt by Fenaba R. Addo

Fenaba R. Addo has an explanation in the article Parents’ Wealth Helps Explain Racial Disparities in Student Loan Debt at the Federal Reserve bank of St Louis.

An analysis of data from a youth survey found that 58 percent of black young adults reported that their parents contributed an average of $4,200 over the course of their college career. That compares to an average of $12,000 given by 72 percent of white families.

Finances by race is summarized in table 1, copied here. It is note that “All averages are statistically different at the 5 percent level by race, indicating that the differences are not a result of random chance.”  (This can be used in a statistics course and if you contact the author you might even get the data.) The article goes on to note how this may impact the future of these students:

As early as age 25, racial wealth gaps begin to emerge. In the age 25 asset survey, college-educated white young adults reported having approximately $17,000 more wealth than black young adults who had attended college. We calculated that a $10,000 increase in young adult net wealth is associated with 7.6 percent less student loan debt. Young adults with high net wealth may have benefited from transfers of wealth from their parents and subsequently may be in a better position to pay down their student loans quicker.

 

About Thomas J. Pfaff

Thomas J. Pfaff is a Professor of Mathematics at Ithaca College. He created this website because he believes that sustainability, ranging from climate change to social justice, should be included in all courses whenever possible.

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