How HBCUs Are Helping Reduce
the Racial Wealth Gap

Black households have a fraction of the wealth of white households, leaving them in a much more precarious financial situation when a crisis strikes, such as the pandemic. Wealth allows households to rebound from a financial emergency, invest in their children’s education, start a business, relocate for better opportunities and buy a house. Unfortunately, the wealth gap between white and black Americans has not decreased in the last 50 years. In 2019, the median wealth (without defined-benefit pensions) of Black households in the United States was $24,100, compared with $189,100 for white households. Homeownership contributing significantly to household wealth was 72% for whites compared to 42% for blacks. And the reasons for the black-white wealth gap are not a mystery. They have resulted from centuries of policies that have systematically disadvantaged Black Americans’ ability to build, maintain, and pass on wealth.

Research shows that one of the proven ways to narrow this gap is through higher education, especially for those who graduate in the STEM, legal and medical fields, which offer higher-paying career opportunities. Black professionals have relied on HBCUs more than any ot

her higher education institution for over 180 years. They graduate 80% of Black judges, 50% of Black doctors, 50% of Black lawyers, 40% of all Black US Congress members, and award 24% of all bachelor’s degrees in STEM fields. And while HBCUs have received record funding over the last two years, with more than 6.5 billion allocated by the Federal government, that doesn’t begin to make up for decades of neglect.

Our Money Matters, a free platform to help HBCU students and community residents get on the path to financial wellness, offers six reasons why minority institutions need our continued advocacy.

  1. HBCUs have a 34% mobility rate of moving their students from the bottom 40% in household income into the top 60%. That is double the national average and five times more than Ivy institutions.
  2. Endowments for HBCUs are a fraction of comparable non-HBCUs, with an average of $15,000 per student compared to $410,000. Endowments are typically used to support scholarships, facility upgrades, and faculty hiring and retention. The difference is significant if you compare Howard University, sometimes referred to as the Harvard of HBCUs, and the HBCU with the highest endowment. Harvard’s endowment is about $42 billion, while Howard’s is around $700 million—less than a 50th of Harvard’s endowment. There is not one HBCU with an endowment of over a billion dollars, while there are over 100 white institutions.
  3. The pandemic required HBCUs to shift funds to remote learning. Many students needed computers and access to Wi-Fi, and schools needed to upgrade their technology infrastructure. Also, many students require student loan debt relief as well. This meant that schools diverted crucial funds from maintenance and other infrastructure investments. Nearly two-thirds of the surveyed schools said they had more than 5 million in deferred maintenance.
  4. Private donations and grants are significant funding sources for all higher education institutions. However, it accounts for a small portion of total revenue for HBCUs compared to non-HBCUs – 17% versus 25.8%. And because much private funding comes with certain restrictions, it means less flexibility for HBCUs to address pressing needs. And when HBCUs must turn to other sources for funding, they face higher fees to borrow money than white institutions. For example, a Black minority-serving institution would have to pay underwriters $35,000 more for a $30 million bond than a white university. In addition, historically black colleges and universities in the U.S. have been underfunded for decades, with billions of dollars in state funding diverted by lawmakers for other purposes, according to higher education experts.
  5. First-generation college students make up 39% of HBCU enrollment, and many rely on student loans. While costs at HBCUs are less than at non-HBCUs, tuition is increasing universally across all institutions. This forces many Blacks to choose between a degree and the accompanying astronomical debt or forgoing college altogether. In fact, in a 2021 nationwide survey of nearly 1,300 Black borrowers conducted by the Education Trust, many questioned whether the debt they incurred was worth it. And yet, Blacks that had a degree were much better equipped to weather the pandemic than those without one.
  6. For faculty members, choosing to work at an HBCU means being unfairly penalized in terms of salary. On average, HBCU faculty earn $18,000 less than those teaching in non-HBCU institutions. HBCU faculty earn about $69,180, compared to $87,385 for faculty in non-HBCUs, making it much more challenging to recruit professors and administrators, especially in expensive cities.

HBCUs have traditionally had to do much more with less. And yet, they have positively impacted society to a far greater degree than the historically meager investments made from private and public sources. HBCUs provide an average of 6,385 jobs in each state and territory where they are located and generate an average of $704.7 million a year in total economic impact. They make up just 3% of higher education institutions in the country, but they educate 10% of all Black college students. And according to recent research, increasing the strength of HBCUs around the U.S. could increase Black worker incomes by about $10 billion, strengthening the economy with $1.2 billion in incremental business profit, additional consumer expenditures of $1 billion, and help to reduce the wealth imbalance.

In conclusion, Black History Month is important for HBCUs as it allows these institutions to celebrate the contributions and achievements of African Americans, recognize the legacy of their institutions, and provide a space for students and faculty to learn and share their perspectives.

Share on Social Media

facts corner

Featured Articles

FQ - Jul 5 (1)2
Sacramento State Recognized as First Black-Serving Institution in California
Sacramento State Recognized as First Black-Serving Institution in California Sacramento State has been...
Read More
FQ - Newsletter start your quest
Make the Most of Your Summer Quest
Dear Students, As Student Success Coaches, we would like to take this opportunity to reach out and communicate...
Read More