In a study conducted by the Federal Reserve Bank of St. Louis, it was recently announced that not even a college degree is helping black or Hispanic families when it comes to their net worth.
The study, which was released in August of 2015, compared the net worth of college educated individuals in the years 2007 and 2013. During this six year span of time, the net worth of college educated black families fell 60%, and the net worth of college educated Hispanic families dropped an astonishing 72%.
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Widespread Drop In Net Worth
Most American families experienced a drop in their net worth during this time, whether they had college educations or not. This is because of the collapse in the housing market and the long lasting turmoil that existed for years after. But for some reason, the households led by black and Hispanic people holding a four year degree or better, were the ones who were hit hardest.
In fact, during this same period of time, white families with a household leader holding a college degree only lost about 16% of their net worth, while college educated Asian families actually saw a 5% increase in their net worth.
The Deciding Factor?
One major reason for how this period of time hit some families much harder than others, apparently lies in how the housing crisis directly affected the different populations. Black and Hispanic families, especially those that were college educated, were hit the hardest by the collapse in home prices.
The major differences are seen when comparing net worth, which measures a family’s assets (like real estate, retirement accounts, and investments), minus debts (like mortgages).
For college-educated Hispanic families, the average value of homes they owned went down 45% between 2007 and 2013, and for college-educated black families, the decline was closer to 51%. This major hit took its toll on the overall net worth of these families.
Non-college-educated black and Hispanic families, by contrast, took on less debt than Asian and white families without college degrees.
This can be explained by the trend for these cultures to invest heavier in assets when they have an increase in income. On an interesting note, while blacks and Hispanics with a college degree were the hardest hit, those same populations without degrees saw their incomes climb by 17.3% and 15.6%, respectively.
Another reason for some of the continued separation between blacks and Hispanics and whites and Asians may be due to the fact that many high-paying fields, such as technology, are dominated by whites and Asians.
Many whites and Asians also tend to pursue their continued education even longer, obtaining advanced degrees allowing them to demand a much higher salary.
The income divide among the races may also stem from lingering discrimination, in which blacks and Hispanics continue to face inequities in hiring.
Major Differences In Income
One thing that is clear is that all racial groups who graduate from college, enjoy a higher median income, however black and Hispanic families get the lowest boost. Black families with college degrees have just over 3.5 times the net worth of non-college-educated black families. But both white and Hispanic families on the other hand, have 4.5 times the net worth, and Asian families have a net worth that is 9.8 times greater than their lesser educated counterparts.
The median income of blacks and Hispanics who finished college declined between 1992 and 2013, while for whites and Asians, median income grew by double-digit percentages, respectively.
However, this does not mean that college degrees have no value for blacks and Hispanics. The median annual family income for blacks and Hispanics with four-year degrees was $52,150 and $68,400, respectively, compared to $26,600 and $30,450 for those who didn’t finish college. Non-college-educated white families have a median net worth of $43,625.