College Enrollment, Graduation, and Financing: The Role of Parental Income and Wealth

Abstract

<p>This dissertation explores the role of parents' financial resources in decisions made about college by parents and children entering adulthood and the consequences of those decisions for both parents and children. The second chapter examines the influence of parental wealth and income on children's college attendance and parental financing decisions, graduation, and the quality of college attended, as well as whether parental financing affects the subsequent indebtedness of parents and children. The results show that higher levels of parents' wealth and income increase the likelihood that children attend college with financial support relative to not attending college, and that parental wealth increases the likelihood that children graduate from college. There is descriptive evidence that parental support for college increases the subsequent level of housing debt that parents hold but does not reduce student debt for children.</p><p>Chapter 3 explores difference by race in the effects of parental wealth and income on college enrollment, financing, and graduation, against the backdrop of racial disparities between black and white families in wealth, income, and college outcomes. I find evidence of significant black-white differences in the effects of parental income and housing wealth. Higher levels of income raise the probability of college enrollment for children of white parents but not black. Conversely, increases to housing wealth raise the likelihood of enrollment only for black children. Increases to parental wealth and income increase the likelihood that white parents offer financial assistance to their children for college by similar amounts. There is no effect of wealth on the likelihood of financial transfers for black parents, but a large effect of income for black parents relative to white ones. I also find racial differences on graduation. I find a small but positive effect of increases in parental income on the likelihood of graduation from college for white children. For black children, I find no effect of income on graduation, but my results indicate that a one percent increase in parental income raises the likelihood of graduation by between 0.60 and 1.18 percent.</p>