America’s economic gap isn’t closing fast enough – CNBC

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Despite increased enrollments of nonwhite students at four-year public and private colleges and universities, completion rates for these students lag their white classmates, according to multiple studies.

Even for those who complete advanced degrees, higher education doesn’t close the economic divide, according to a study last year by the St. Louis Federal Reserve.

Analyzing two decades of data on wealth and income, the authors found that higher education helped protect wealth, especially during financial shocks like the Great Recession, but only among white and Asian families. Between between 2007 and 2013, the median wealth of all families headed by a four-year college graduate fell by 24 percent — just half as much as the drop among families without a college degree. That pattern held up among white and Asian households.

Higher education, though, didn’t protect the wealth of the typical Hispanic and black college-headed family. Median wealth fell by about 72 percent among Hispanic college-grad households compared with a 41 percent drop among Hispanic families without a college degree; among blacks, household wealth fell 60 percent for college-headed households versus 37 percent for those without a degree.

“Higher education alone cannot level the playing field,” the authors wrote.

The wealth divide was also widened by the Great Recession following the massive loss of savings embedded in the equity derived from owning a home, for generations the primary driver of wealth for middle class households.

After an epic lending boom that saw mortgage lenders ignore decades of prudent underwriting practices, the collapse brought a sharp contraction in the availability of credit to buy a home. The resulting housing recession has contributed to one of the slowest economic recoveries in over a half century.

That reversal in lending standards has hit African-American and Hispanic households hardest. Mortgage applicants from those groups make up a large share of an estimated 4 million loans that were not originated due to tight credit standards between 2009 to 2013, according to an analysis by the Urban Institute. Loans to African-American and Hispanic borrowers fell by 50 percent and 38 percent, respectively, versus a drop of just 31 percent for white borrowers. Loans to Asian borrowers increased by 8 percent.

To help overcome that hurdle, housing advocacy groups and community nonprofits have begun working to bridge the credit access gap.

In New Mexico, Santa Fe-based Homewise offers affordable mortgages with low down payments, develops and sells residential property to clients, and provides financial education that helps future homeowners navigate the complex purchasing process better manage their finances and keep up with mortgage payments. Launched in 1986, the organization helps a few hundred first-time homebuyers a year. As a group, program participants have a mortgage delinquency rate of under 1 percent, less than a fifth of the national rate.

America’s economic gap isn’t closing fast enough – CNBC