Historically, the wealth gap between Black and White families has been huge. Typically, over the past generation White families have had wealth that was 10 times that of Black families.
Components of family wealth, such as stocks, bonds, money in the bank, and real estate, produce interest, dividends, or rental income which are commonly used to offset or pay college costs. Wealth also includes the value of a family’s home. This important asset can be sold or borrowed against to provide funds for college expenses.
Prudential Financial conducted a survey of more than 1,100 African American adults ages 25 to 70 with incomes of at least $25,000. The median income of those surveyed was $61,000. (The median income of all Black households in the United States is about one half this level.)
The study found that college-educated African Americans are twice as likely as college-educated White Americans to have student loan debt. This debt burden is a drag on wealth building. The survey also found that while half of all African American adults with incomes of more than $25,0000 had a 401(k) or other retirement plan, their balances were typically half that of their White peers. Thirty percent of those African Americans with retirement plans stated that they had taken loans from these plans to repay other debt. The survey showed that more than half of the African Americans surveyed were supporting other family members who were not as well-off. Blacks were more than twice as likely as Whites to be providing financial support for unemployed friends and family members. This too hinders wealth formation.
The study found that half of all African Americans surveyed thought they were better off financially than a year ago, whereas 19 percent thought they were worse off financially.