TITLE:
Timing Wealth Building to Maximize Return on Degree
AUTHORS:
William Elliott, Benjamin Osafo Agyare, Subin Min
KEYWORDS:
Return on Degree, Wealth Premium, Wealth Inequality, Economic Mobility, Student Loans
JOURNAL NAME:
Sociology Mind,
Vol.15 No.4,
September
18,
2025
ABSTRACT: America has a return on degree problem. This study uses data from the Panel Study of Income Dynamics (PSID) and the National Longitudinal Survey of Youth 1979 (NLSY79) to test whether the amount of wealth at different key transitional periods in a child’s life increases their return on degree. Further, wealth is measured at birth (ages 0 - 3), at college enrollment (age 18), and at college graduation (age 25). Median net worth in U.S. households is used as the main proxy for return on degree. In the PSID, median net worth in U.S. households is measured at ages 37 - 42 (financially established adulthood) and 55 - 64 in the NLSY79 (pre-retirement). Findings reveal that even having $500 of either enrollment wealth or graduation wealth can have a substantial positive impact on the odds (42% and 52%, respectively) that a college graduate reaches median net worth of U.S. households by the time they are middle age. Further, findings indicate that the most impactful time for college graduates to receive a wealth transfer that has the best chance to maximize their return on degree is between ages 25 to 30. This is a period when the racial wealth gap college graduates experience is at its lowest (about $15,788). An implication of these findings is that, at the end of the spectrum, policies like the student loan policy can cause college graduates to have negative wealth. In the middle of the spectrum are policies like free college tuition, leaving children with no debt. Even these polices are unlikely to have the biggest impact on addressing America’s return on degree problem. To equip the education system to fulfill its role as the “great equalizer”, policies may be needed to provide college graduates with a wealth transfer shortly after graduating from college when the wealth gap is at its smallest.