The Large Racial Wealth Gap Can Hinder Black Families’ Ability to Pay for Higher Education

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.

The U.S. Census Bureau recently released new data on household wealth in 2013. The statistics show that the median net worth of non-Hispanic White households was $132,463 in 2013. For Black households, the median net worth was $9,211. Thus, the median net worth of White households was more than 14 times the median net worth of Black households.

More than 36 percent of all non-Hispanic White households had a net worth greater than $250,000. The comparable figure for Black households was 11.4 percent. More than 30 percent of Black households held a negative net worth, meaning their debts exceeded their assets.

Nearly 72 percent of non-Hispanic White households held equity in their homes. This valuable asset can be used as collateral for financing higher education. But only 41.9 percent of all Black households held equity in their homes. And for those families that held equity in their homes, the median value of the asset was far less for Blacks than was the case for non-Hispanic Whites.

If we exclude home equity from the data, we find that the median net worth of non-Hispanic White households in 2013 was $51,096. For Black households, the median net worth excluding home equity was $2,725. Thus, when we exclude home equity from the data, White households had a net worth that was nearly 19 times as great as Black households.

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