Daily Egyptian

Education’s relationship to riches remains unclear

By Sam Beard, @SamBeard_DE

In the last 10 years, the amount of student debt in America has ballooned from $250 billion to more than $1.2 trillion dollars, according to Forbes.

Unfortunately, even if every young person in America was provided free higher education, they may still not fare as well as their parents economically, St. Louis Federal Reserve Senior Economic Advisor Bill Emmons said.

The Role of Education in Wealth Accumulation, an event from 11:30 a.m. to 1:30 p.m. Wednesday at the Dunn-Richmond Economic Development Center, will focus on the correlation between schooling and personal riches.

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The St. Louis Federal Reserve, a regional branch of the nation’s independent central bank, commissioned a study and series of essays on how age, education and race separate thrivers from strugglers in today’s economy.

Wednesday’s event focuses on education and how age and race are wrapped up in one’s educational prospects. 

Emmons said some of their findings have been troubling.

He said the issue of wealth inequality cannot be overcame by simply providing poor people with more education, as evidenced by the surge in black and hispanic college graduates in recent years.

“Black and hispanic college graduates have not fared well on average over time, and that is kind of puzzling and something we are trying to dig into,” Emmons said.

Randolph Burnside, an associate professor of political science, said because people of color have less wealth on average than their white counterparts, they are more likely to accrue a larger amount of student debt.

Eighty percent of black students take out student loans with an average bill of $28,692, compared with 66 percent of white students averaging $24,842, according to Demos.org. 

“It’s not surprising,” said Chicago native Albert Mensah-Bekoe, who is taking a year off of school to whittle away at his students loans. “It’s indicative of the society we live in.”

Before taking time off to work, Mensah-Bekoe was a junior in computer science. He said many students of color drop out after discovering the true cost of attendance. 

“People who finish their degree are more likely to have student debt today than they were 10, or 20 years ago,” Emmons said. “Its not just student debt — other kinds of debt, like credit card debt and auto debt, are more common today among young people than they were 20 years ago.”

He said economists tend to focus on the relationship between education and annual income. However, the St. Louis Federal Reserve’s research shows the correlation between education and wealth accumulation more accurately showcases how one’s education level affects their financial prospects.

“The reason that wealth is even more important than income in understanding why some families are doing better than others is not just the direct, but also indirect reasons,” Emmons said.

He said the ability of wealthy parents to send their kids to college with less debt — or even zero debt — compared to poorer parents, is a direct effect.

The indirect effects are less obvious, which is why Emmons wants to stress their importance.

“Education is important, but I think it is not a silver bullet [when it comes to fighting wealth inequality],” Emmons said. “What seems to be the case is there are a lot more complicated, complex combinations, causes and effects. And education, I would say, is potentially a relatively weak policy instrument.”

Burnside said the financial insecurity many young people see in their future has caused them steer the direction of their education towards majors that have job prospects, as opposed to what they are passionate about or what will be beneficial to democracy. 

“If what we see continues, with the increaing cost of college, less state support to education and a stagnation of incomes for families, what’s next,” He asked. “We are going to have people that are making a business decision instead of an educational or academic decision.”

Sam Beard can be reached at [email protected] or on Twitter @SamBeard_DE.

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