Does Student Loan Debt Contribute to Racial Wealth Gaps? A Decomposition Analysis
30 Pages Posted: 3 Jan 2018 Last revised: 24 Nov 2018
Date Written: November 21, 2018
There is evidence of a growing student debt burden over the last decade. Previous research has shown that the presence of student debt jeopardized the short-term financial health 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 the recent data from the 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, and 50th percentile of wealth with student debt is associated with a 80%, 49%, and 37% wealth loss compared with a similar household with no student debt. The decomposition results suggest that student debt plays a significant role in explaining the Black-White wealth gap but not the Hispanic-White wealth gap across the wealth distribution.
Keywords: student loans, consumer debt, wealth inequality, racial disparities, educational finance
JEL Classification: D14, H81, I22, I24
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