- Older millennials are finally building wealth, per the St. Louis Fed, but the racial wealth gap persists.
- White older millennials have a median wealth of $88,000, compared to $5,000 for Black older millennials.
- One reason for this divide may be that Black millennials have a heavier student debt burden.
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Older millennials born in the 1980s are making a wealth comeback, but there’s a vast racial wealth gap lurking underneath this progress.
In 2016, older millennials’ wealth levels were 34% below where they should be if the Great Recession hadn’t occured, per a 2018 study by the Federal Reserve Bank of St. Louis. Within three years, the first part of a new St. Louis Fed study found, they had narrowed that wealth deficit down to 11%.
However, the second installment of the Fed’s study reveals that these strides look quite different when broken down by race. While white and Hispanic families saw improvement in building wealth, the study states, Black families experienced the reverse as they fell further below wealth expectations between 2007 and 2019.
From 2016 to 2019, white families of this older millennial cohort saw wealth levels go from 40% to 5% below where they should be. That wealth deficit doubles to 10% for Hispanic families, but that is still less than their 2016 wealth deficit of 15%. The deficit soars for Black families, who were 52% below wealth expectations in 2019 – a significant increase from 39% three years prior.
These differences look just as staggering when framed as median wealth for the same year. For older white millennial families, that’s $88,000 – four times the $22,000 median wealth for Hispanic families and roughly 17 times the $5,000 median wealth for Black families.
The report doesn’t take into consideration effects from coronavirus recession, as full data for that period isn’t yet available.
Black millennials bear a bigger student debt burden
Despite these wealth differences, the St. Louis Fed found that all three groups had income levels that aligned with expectations, indicating that earnings weren’t preventing wealth accumulation.
The report suggests that one reason older Black millennials are increasingly falling below wealth expectations is because of their staggering student-loan debt.
Black students shoulder a heavier debt burden than their white peers: About 87% of Black students attending four-year colleges take out student loans compared to about 60% of white students. They also owe $7,400 more on average than their white peers after graduating, per the Brookings Institute.
Black borrowers under the age of 40 were also more likely to be behind on payments in 2019 than white or Hispanic borrowers, according to the Federal Reserve. Black graduates are nearly five times as likely to default on their loans than their white peers.
The racial wealth gap is why some politicians and lawmakers are advocating for student-debt cancellation. Several experts previously told Insider that communities of color would be one of the groups that will gain the most from student-debt cancellation plans.
Right now, it looks like this socieconomic divide isn’t close to narrowing any time soon. As the St. Louis Fed report’s authors, Ana Hernández Kent and Lowell Ricketts, wrote, “Given the large wealth deficit and negative trend, the disparities among older Black millennials may persist as these families age, inhibiting their full participation in the economy.”