By Ana Hernández Kent, Policy Analyst, Center for Household Financial Stability
For many high school seniors, late spring is a time of celebration. Most of them are graduating and embarking on the next chapter of their lives—for 2 in 3 high school graduates, this means college. Bureau of Labor Statistics. “College Enrollment and Work Activity of Recent High School and College Graduates Summary.” April 26, 2018.
This year marks the 10-year anniversary of my own high school graduation. While some of my fellow seniors were deciding whether college was the right path for them, my decision was not whether I would go to college, but to which of the many schools I applied to I would go.
In fact, it embarrasses me a bit now to admit this, but I didn’t even fully grasp that for many high school seniors, going to college is not the norm. And of those who end up going, only 3 in 5 actually graduate within six years.U.S. Department of Education, National Center for Education Statistics. The Condition of Education 2018 (NCES 2018-144), Undergraduate Retention and Graduation Rates.
In my job at the St. Louis Fed’s Center for Household Financial Stability, I have realized that much of my attitude toward college attendance and graduation likely had to do with having highly educated parents. Recent evidence from the Center shows that the vast majority of working-age family heads in the U.S. followed in their parents’ educational footsteps. In my February 2019 essay, Children of College Graduates Earn More and Are Richer, I noted that 60% of family heads have a four-year college degree if at least one of their parents does, too. On the other hand, if neither parent has a degree, only 1 in 4 family heads are first-gen college grads.
The strong relationship between one’s own education and that of one’s parents has important financial implications. There are large income and wealth gaps between families that have the same level of education but that differ on the educational attainment of the family head’s parents. See the figure below.
For example, the net worth (i.e., wealth) of the typical family with two generations of college graduates, $298,000, is 39% larger than the wealth of the typical first-gen family, $214,000. Even a family headed by someone with no college degree (but whose parent is a college grad) owns nearly twice what a family with no college in either generation does. Respectively, that’s $77,000 in net worth versus $41,000.
NOTES: This bar chart shows the median net worth and annual income of the following households with working-age family heads. From left to right: Two-Gen Grads, First-Gen Grads, Only Parent Grad and No College Grads. The figures for two-gen grads are income of $118,000 and net worth of $298,000; for first-gen households, they are $95,000 in income and $214,000 in net worth; for households in which only a family head’s parent is a college grad, they are $60,000 in income and net worth of $77,000; and for families with no college in either generation, they are $44,000 in income and net worth of $41,000. All numbers are 2016 dollars rounded to the nearest $1,000.
SOURCES: Federal Reserve Board’s Survey of Consumer Finances and author’s calculations.
My dad has a Ph.D. and my mom has a master’s degree. All of my grandparents graduated from college. Even two of my great-grandparents earned advanced degrees. No wonder I felt like higher education was my only path.
Of course, demography isn’t economic destiny. Not all people with college-grad parents go on to become college grads themselves, and if they do, better financial outcomes are far from guaranteed.
But, as more and more families are headed by college grads, we would do well to help first-gen students—who tend to struggle more Cataldi, Emily Forrest; Bennett, Christopher T.; Chen, Xianglei and S. A. Simone. “First-generation students: College access, persistence, and postbachelor’s outcomes” (NCES 2018-421). National Center for Education Statistics. and for whom a bachelor’s degree is not the norm—succeed.
1 Bureau of Labor Statistics. “College Enrollment and Work Activity of Recent High School and College Graduates Summary.” April 26, 2018.
2 U.S. Department of Education, National Center for Education Statistics. The Condition of Education 2018 (NCES 2018-144), Undergraduate Retention and Graduation Rates.
3 Cataldi, Emily Forrest; Bennett, Christopher T.; Chen, Xianglei and S. A. Simone. “First-generation students: College access, persistence, and postbachelor’s outcomes” (NCES 2018-421). National Center for Education Statistics.