Understanding Disparities in Financial Security

Black and Latine college students are far more likely to face financial hardships than their white peers. And regardless of race or ethnicity, female students are more likely than men to experience financial insecurities.

Those are two of the biggest takeaways from “Unveiling Disparities: Racial, Ethnic, and Gender Gaps in Student Financial Insecurity and Proposed Solutions,” a new report published Wednesday by Jobs for the Future (JFF), a nonprofit focused on education and the workforce.

“We know that financial insecurity presents many obstacles to postsecondary persistence and completion,” said Lois Joy, research director at JFF and co-author of the report. “What we didn’t see was a large-scale analysis of racial, ethnic and gender differences in the incidents of financial insecurity.”

To achieve that, JFF partnered with Trellis Strategies, a higher education research and consulting firm, and analyzed Trellis’s 2022 financial wellness survey of more than 30,000 students from 89 postsecondary institutions across 23 states.

Controlling for factors such as age, gender, credits accumulated, parenting status and institution type, Joy and her team used the data to identify racial, ethnic and gender gaps in students’ abilities to cover the cost of food, housing, utilities, medical care, child care and a $500 emergency expense.

“Black and Latine students are walking in the door from situations where they face more inequality in various parts of our economy, labor market and educational system,” Joy said. “We wanted to capture what they’re coming in the door with because it’s going to be different than white students.”

Black students were about twice as likely as white students to struggle to pay for basic needs. And although the gaps for Latine students weren’t quite as wide, they were about 1.5 times more likely than white students to need assistance paying for food, utilities and medical care.

“These results aren’t surprising,” said Nicole Smith, Chief Economist at the Georgetown University Center on Education and the Workforce. “What we’re dealing with here is intergenerational passing down of financial insecurity a lot of students are trying to get out of with a college degree.”

But race wasn’t the only factor to correlate with higher rates of student financial insecurity, the report found; female college students, regardless of their race or ethnicity, experience financial difficulties more often than men.

Women were almost twice as likely as men to report that they would struggle to handle a $500 emergency, 1.5 times more likely to use food assistance, 1.4 times more likely to require housing assistance, 1.3 times more likely to draw on utility assistance and 1.6 times more likely to seek financial help for medical care. Among student-parents, women were two times more likely than men to need child care assistance.

While it’s well-known that mothers are more likely to bear the responsibility of managing child care than fathers, Joy said there may be another underlying issue heightening financial insecurities for female students: Women are more likely to enter career fields like nursing and teaching that require more education to make salaries comparable to what men can earn in high-demand trades.

“Access to higher-paying quality jobs for women tends to require a secondary degree,” said Joy, who noted that some of the more lucrative trade professions aren’t as accessible for women as they are for men. “Apprenticeships in good-paying construction and electrician jobs are overwhelmingly still male-dominated. The on-ramps for women haven’t been built.”

Closing the Gaps

But both female and male student-parents were more likely than their nonparent peers to encounter financial insecurities. Student-parents tend to rely much more heavily on social assistance for food and medical assistance programs than nonparents, according to the report. They were also 1.5 times more likely to say they’d have difficulty paying for a $500 emergency.

The report also noted that how students pay for their college education influences their financial stability. Compared to students using personal savings and family assistance, those who relied on grants, loans and scholarships reported more financial insecurity, including an inability to cover food, housing, medical care and unexpected emergencies.

“It’s not surprising at all to see students who are relying on Pell Grants struggle to repay the costs that the Pell Grant isn’t covering,” said Mark Huelsman, director of policy and advocacy at The Hope Center at Temple University. “Loans can also provide a foot in the door for financing higher ed, but at what cost? Students who take on debt are extremely likely to struggle with that debt especially if they come from households and communities that have historically struggled to build wealth.”

Black and female students of all demographics were more likely than other students to rely on loans to fund college, according to the report. While Latine students were less likely to depend on loans, they joined Black and female students in reporting lower levels of confidence about their ability to pay off debt after graduation compared to their white and male peers.

To correct such disparities, JFF’s report suggests a three-pronged solution: equipping colleges with basic needs centers, making federal, state and local assistance programs more accessible to students, and collecting more data on student financial wellbeing.

“Colleges could use that data to understand the needs of their students and how to service them,” Joy said. “They’d have a clear picture to be able to show policymakers what’s contributing to these stop-out gaps.”

Shaun Harper, a professor at the University of Southern California’s Race and Equity Center, said JFF’s report “is timely, given the current politicized attacks on diversity, equity and inclusion in higher education.” And because the inequities outlined in the report aren’t “raceless, a raceless approach to addressing them won’t work,” he said. “In fact, colorblindness is almost guaranteed to exacerbate these disparities.”