Parents’ financial assistance for college and black-white wealth disparity

Abstract

This study examines the roles of parents’ financial assistance for college in explaining persistent Black-white wealth disparity across generations. Using the data from the Panel Study of Income Dynamics, this study runs Oaxaca-Blinder decompositions to estimate the proportion of the racial wealth disparity explained by parents’ socioeconomic resources and financial assistance for college. Analyses show that racial disparity in net worth would decline significantly if Black people receive parental financial assistance for college at the same rate as their white counterparts. Parental financial assistance is also one of mechanisms through which parental economic resources maintain Black-white wealth disparity across generations. Parental assistance for college explains racial wealth disparity independently from children’s educational attainment and family income: the coefficient of parental assistance is statistically significant when educational attainment and family income are controlled for. Findings call for policy interventions to reduce the impacts of parents’ economic resources on financing college education to promote racial equity.