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

Venoo Kakar; Gerald Eric Daniels; Olga Petrovska

doi:10.1111/joca.12271

journal article Open Access Jul 21, 2019

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

Venoo Kakar

Gerald Eric Daniels

Olga Petrovska

Journal of Consumer Affairs Vol. 53 No. 4 pp. 1920-1947 · Wiley

View at Publisher Save 10.1111/joca.12271

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 an 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% and 7% of the Black‐White wealth gap across the wealth distribution but is insignificant in explaining the Hispanic‐White wealth gap.

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Published: Jul 21, 2019
Vol/Issue: 53(4)
Pages: 1920-1947
License: View

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Cite This Article

Venoo Kakar, Gerald Eric Daniels, Olga Petrovska (2019). Does Student Loan Debt Contribute to Racial Wealth Gaps? A Decomposition Analysis. Journal of Consumer Affairs, 53(4), 1920-1947. https://doi.org/10.1111/joca.12271

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

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