Research Insights

Federal student aid emphasizes income and under-acknowledges wealth. I (1) assess whether this under-acknowledgment reinforces Black-white inequality in student borrowing and debt, and (2) test whether more wealth-conscious aid would narrow the Black-white gap in student borrowing.

Student debt is very racially unequal, and the large Black-white gap especially merits attention. A likely contributing factor is wealth disparity and the structural racism undergirding it. The Black-white wealth gap greatly exceeds the income gap, and per Oliver and Shapiro’s Racialization of State Policy thesis, this gap is rooted in policy choices that have depressed Black wealth. Thus Black families seldom have surplus wealth, a large part of college financing.

I advance theory with the Racialization of Financial Aid Policy, a framework that locates financial aid as a site where ostensibly race-neutral policies perpetuate racial gaps in wealth and debt. I propose that one example is the focus on income over wealth in allocating Pell Grants.

Hence, better addressing wealth may narrow borrowing gaps by targeting a form of financial need that is under-met and disproportionately faced by Black students. I consider a supplemental Pell Grant based only on wealth, testing its potential to narrow the Black-white gap in student borrowing.

I use the National Postsecondary Student Aid Study, the National Longitudinal Study of Youth-1997, new decomposition methods, and regression discontinuity methods.

Funder: Wiliam T. Grant Foundation

Amount: $50,000

PI: Christian Smith, Louise McBee Institute of Higher Education