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posted on 01 February 2020

Is College Always The Answer?

from the St Louis Fed

At a recent public event, St. Louis Fed Policy Analyst Ana Hernflndez Kent explored at length her team’s research findings related to educational attainment, income and wealth.

In particular, she focused on first-generation college graduates. Kent explained that so-called “first-gen grads" are a valuable demographic to analyze because they exemplify higher education’s promise of upward mobility.

Kent and her colleagues at the Center for Household Financial Stability found that typical first-gen grad families do enjoy a financial boost from a college degree when it comes to income and wealth. (During the Dialogue with the Fed event, she also noted how the educational attainment of one’s parents also appears to boost one’s own income and wealth - even if one does not have a college degree.)

So, where does the leave the college question? Is college the answer to attaining wealth?

In the video above, Kent says, “There’s a lot of variability in these types of estimates. What I’ve been showing you is the median - the ‘typical’ family, the family right at the 50th percentile." That doesn’t reflect how families at the 75th or 25th percentiles are doing, she said.

To illustrate, Kent compared families at different wealth percentiles with different educational legacies. For example:

  • Families headed by someone without a four-year college degree and whose parents also did not attain a four-year degree have a net worth of $213,000 at the 75th percentile.
  • Families headed by someone who did earn a four-year degree and whose parents also did have a net worth of $52,000 at the 25th percentile.

“Just because you have a college degree doesn’t automatically mean you’re going to be doing better than someone who doesn’t, and vice versa," she said.

Additional Resources

Source

https://www.stlouisfed.org/on-the-economy/2020/january/explaining-parent-boost-income-wealth

Disclaimer

Views expressed are not necessarily those of the Federal Reserve Bank of St. Louis or of the Federal Reserve System.

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