Does Student Loan Debt Contribute to Racial Wealth Gaps? A Decomposition Analysis

Kakar, V. Ⓡ Daniels, G.E., Jr. & Petrovska, O. (2019). Does Student Loan Debt Contribute to Racial Wealth Gaps? A Decomposition Analysis. Journal of Consumer Affairs, 53: 1920-1947. doi:10.1111/joca.12271

Posted: 3 Jan 2018 Last revised: 31 May 2022

See all articles by Venoo Kakar

Venoo Kakar

San Francisco State University

Gerald Daniels

Howard University

Olga Petrovska

San Francisco State University

Date Written: June 21, 2019

Abstract

There is evidence of a large and growing student debt burden over the last decade. Previous research has shown that the presence of student debt jeopardized the short-term financial wealth of U.S. households during the Great Recession. We examine the effects of student loan use on the wealth of U.S. households post-recession, using recent data from the 2013 and 2016 Survey of Consumer Finances. We find that mean 2016 wealth for households with no outstanding student debt is more than four times higher than households with student debt. We find that living in a household at the 15th, 30th, 50th, 70th, and 85th percentile of the wealth distribution with student debt is associated with a 80%, 49%, 37%, 35%, and 36% wealth loss compared with a similar household with no student debt. Our decomposition results suggest that student loan use can explain between 3-7% of the Black-White wealth gap across the wealth distribution but is insignificant in explaining the Hispanic-White wealth gap.

Keywords: student loans, consumer debt, wealth inequality, racial disparities, educational finance

JEL Classification: D14, H81, I22, I24

Suggested Citation

Kakar, Venoo and Daniels, Gerald and Petrovska, Olga, Does Student Loan Debt Contribute to Racial Wealth Gaps? A Decomposition Analysis (June 21, 2019). Kakar, V. Ⓡ Daniels, G.E., Jr. & Petrovska, O. (2019). Does Student Loan Debt Contribute to Racial Wealth Gaps? A Decomposition Analysis. Journal of Consumer Affairs, 53: 1920-1947. doi:10.1111/joca.12271, Available at SSRN: https://ssrn.com/abstract=3094076 or http://dx.doi.org/10.2139/ssrn.3094076

Venoo Kakar (Contact Author)

San Francisco State University ( email )

1600 Holloway Avenue
San Francisco, CA 94132
United States
4154053461 (Phone)
4153381057 (Fax)

HOME PAGE: http://www.venookakar.com

Gerald Daniels

Howard University ( email )

2400 Sixth St NW
Washington, DC 20059
United States
(202) 806-9895 (Phone)
(202) 806-4896 (Fax)

HOME PAGE: http://gerald-daniels.com/

Olga Petrovska

San Francisco State University ( email )

1600 Holloway Avenue
San Francisco, CA 94132
United States

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