Two-year community colleges offer the promise of affordable, flexible education for students who might not otherwise consider post-secondary schooling, and can serve as a cost-effective bridge to a bachelor’s degree. But they may not be a good choice for everyone. Chicago Booth’s Jack Mountjoy finds that community colleges do indeed boost career earnings for students whose education would otherwise have ended after high school, but for the roughly one-third of students who would otherwise have enrolled directly in a four-year college, enrollment in community college means a significantly reduced chance of ultimately receiving a bachelor’s degree—which in turn means lower earnings after college. Mountjoy’s results suggest that policy makers considering expanded access to community colleges should take into account both the democratizing and diversionary effects of such institutions.
Narrator: Seventeen million students were enrolled in four-year colleges in 2017. At the same time, nearly 9 million students were enrolled in public two-year colleges. These two-year colleges—that are known as community colleges—are, for many students, a first step to a four-year degree. In fact, if you take all the students who earned a bachelor’s or equivalent in the 2015–16 school year, half had enrolled in a two-year college at some point in the previous decade.
But many students who enter a two-year college with ambitions toward a bachelor’s degree never get there. And students who stop after community college earn around 30 percent less than people with bachelor’s degrees. So do two-year colleges boost upward mobility? Or do they cost students by causing them to miss out on the benefits of a four-year education?
Jack Mountjoy: It looks like, among students who start at a four-year university directly, only about 60 percent of them end up getting a bachelor’s degree. So about 40 percent of American students who start at a four-year college or university are going to drop out. That 60 percent, though, looks very good compared to the average rates for students who start at a two-year community college. For them, only about 30 percent are even going to make it into a four-year college as a result of transferring up. And, overall, only 14 percent are ultimately gonna get a bachelor’s degree.
Narrator: That is Chicago Booth’s Jack Mountjoy. He’s been studying the effects that the locations of two- and four-year colleges have on students’ choices of whether and where to begin college, and the long-term consequences of those choices.
Jack Mountjoy: You know, suppose we’re going to build a new two-year community-college campus in a new neighborhood. That’s gonna make access to two-year college increase for a lot of students in that neighborhood. And, the question is, you know, first of all, what types of students are entering that two-year campus? How many of them would not have gone to college otherwise? And how many of them are diverted from starting at four-year colleges and universities? And, then the second question, of course, is just what exactly are the causal impacts of making those choices on those two different margins?
Narrator: Mountjoy analyzed administrative data from Texas that span the population of the entire state, linking records from high schools, colleges, and employers.
Jack Mountjoy: I can follow students from what test scores they’re getting in high school, what sort of courses they were taking, whether they graduate high school. And, then into college, I can see where they initially start college, whether they transfer, whether they drop out, whether they ever get a degree, and then follow them for several years into the labor market by seeing quarterly earnings records. In the data, what I’m using is the variation in students’ distances from their high school to the nearest campus. So, you know, “I live a certain distance from the local two-year college, and I also live a certain distance from the local four-year college.” And, I’m comparing students who are equal in their distance to the four-year campus but vary in their distance to a two-year community-college campus.
And, surprisingly, that does have a nontrivial impact on enrollment behavior. So if I were to move you 10 miles further away from a two-year college campus, while holding your distance to a four-year campus fixed, that actually makes you about 4 percentage points less likely to ever start at a two-year college. Likewise, if I keep your distance to a two-year college fixed, and move you 10 miles further away from a four-year campus, that makes you about 2.5 percentage points less likely to ever start at the four-year campus.
Narrator: So if you’re closer to a two-year college, you’re more likely to end up there. But does that actually help you in the long run?
Jack Mountjoy: So what I find is that on net, expanding access to two-year colleges does tend to boost outcomes, so students end up getting more degrees and they end up earning more in the labor market. But I use my new method to decompose that net outcome into these two different and potentially opposing tribune margins. On the one hand, I find about two-thirds of the students that now enter a two-year community college as a result of increased access are much better off from doing so. They would not have otherwise gone to any college, and as a result of stepping foot in a two-year college, they end up having about a 25 percent chance of getting a BA, which is not huge, but it’s much more than zero, which is what their alternative would’ve been. And they end up earning about 20 percent more in the labor market after college, about 10 years out—so we’re following students pretty well into their early careers.
Narrator: But what about that student who would’ve gone to a four-year college instead?
Jack Mountjoy: So students who would’ve started at a four-year institution and are now induced into starting at a two-year institution end up about 18 percentage points less likely to ultimately get a bachelor’s degree, and they earn about $500 per quarter less in the labor market about 10 years out from college entry.
Narrator: And the results become even more pronounced when we look at women and low-income students.
Jack Mountjoy: So I split the sample initially by men versus women and I find that women are really driving these results. They actually have larger positive gains from going to a two-year college relative to not attending any college, but the women on the margin between two-year and four-year entry are also having larger negative diversion affects. So women seem to be impacted more on both of these angles compared to men.
So when I split the sample by low-income versus high-income students, I find that low-income students really are the ones gaining the most from expanded access to two-year colleges. So it turns out both that low-income students are much less likely to be diverted from four-year to two-year—the vast majority, about 80 percent of low-income students who are induced into starting at a two-year campus otherwise would not have enrolled in any college as a result of expanding access—and, also, conditional on being in that margin, they have pretty big gains from enrolling in a two-year college. So two-year colleges really are providing a lot of value for disadvantaged students because the vast majority of them would not have otherwise enrolled in any college.
Universally expanding access to two-year community colleges is a very blunt instrument for trying to boost upward mobility. I think instead what we should be focused on is more targeted policies toward means-tested scholarship programs for low-income students or coordinated outreach programs to the types of students that are going to be underrepresented in higher education more broadly, as a way to really harness two-year colleges as an engine of upward mobility for the types of students who are actually going to benefit from them the most.
Research takes a broad view of what happened when Chicago tore down distressed public housing.
Line of Inquiry: Milena Almagro on Public Housing Demolition and Urban Inequality
Chicago Booth’s Raghuram G. Rajan, former Governor of the Reserve Bank of India, discusses paths for growth for the world’s largest democracy.
Can India’s Economy Break the Mold?
But the pandemic-era moratorium may also have led some borrowers to take on even more debt.
Pausing Student-Loan Payments Boosted the EconomyYour Privacy
We want to demonstrate our commitment to your privacy. Please review Chicago Booth's privacy notice, which provides information explaining how and why we collect particular information when you visit our website.