Parental Financial Assistance for College and Persistent Black-White Income Disparity

Objective: Racial economic disparities are wide and persistent in the United States. This study aims to expand our knowledge of racial economic disparities by examining the role of parental financial assistance for college in maintaining racial income disparities across generations. Method: Using data from the Panel Study of Income Dynamics, I applied Oaxaca-Blinder decomposition to separate the Black-white income disparity into an explained component (disparity due to compositional differences in parental socioeconomic status and financial assistance) and an unexplained component. Results: Black children have a lower chance of receiving parental financial assistance for college mostly due to their parents' lower levels of socioeconomic resources compared to white parents. Parental financial assistance explains a significant portion (7%) of the Black-white income disparity, but it loses its statistical significance when children's own educational attainment is considered. Conclusions: Parental financial assistance for college is one mechanism through which parents' socioeconomic resources perpetuate the Black-white income disparity across generations. Findings support the need for social policies to promote equal educational opportunity for all children and to reduce racial economic disparities. Lowering financial barriers to college would improve all children's economic prospects and reduce racial economic disparities.