The College Wealth Premium Has Collapsed
The wealth premium has collapsed precipitously over the past 50 years.
The College Wealth Premium Has Collapsed
January 8, 2020
By Annie Lowrey
Summary
The wealth premium has collapsed precipitously over the past 50 years.
White graduates born in the '30s were worth 247 percent more than their non-college-educated peers; white people born in the '80s were worth just 42 percent more.
Among black families, the wealth premium sat at more than 500 percent for those born in the '30s and fell to zero-yes, zero-for those born in the '70s and '80s. Notably, the study corrects for the fact that households tend to accumulate wealth as they age; the issue is not that members of the Greatest Generation and Boomers have had more time to let their homes appreciate and their money sit in the stock market.
Younger folks have come of age during an era of consumer debt, with banks more than happy to load customers up with credit cards, car loans, and so on.
"The leveraging of college-graduate balance sheets over time is entirely consistent with the progressive weakening of their overall financial positions that we identified-even while the college and postgraduate income premiums remained intact," the authors write.
College costs have increased by a factor of 14, the study notes.
More and more students have taken out heavy debt burdens to be able to go to school, burdens that then eat away at their earnings, month after month, for years on end.
Even if going to college is still important for young people's earnings and employment, it is less of a clear economic boon than it was 30 years ago.
In a way, the paper makes a powerful argument for making college a public good, low-cost or even free for everyone.
The spiraling cost of higher education is choking Millennial families, and more young people would be able to go to college-and get the full financial benefit of getting a degree-if they were able to do it for the same price as their parents paid.
Reference
Lowrey, A. (2020, January 9). The College Wealth Premium Has Collapsed. Retrieved January 14, 2020, from https://www.theatlantic.com/ideas/archive/2020/01/college-wealth-premium-collapsed/604579/.