Student outcomes at community colleges: What factors explain variation in loan repayment and earnings?

Community colleges play an important role in providing access to higher education and promoting economic mobility by offering postsecondary opportunities to a wide range of students. Student outcomes at community colleges vary widely across institutions and programs, however, leaving some policymakers to wonder if more pressure is needed to hold these institutions accountable for their students’ future labor market outcomes.

Federal policy has largely excluded community colleges from accountability standards, but that might change in the future. For example, the Biden administration has announced plans to review the Gainful Employment regulations. If re-regulated, an important question is whether this accountability policy should be expanded to apply to additional postsecondary programs—including associate degree programs offered at community colleges.

How might such a policy influence community colleges? If variation in student outcomes across programs is correlated with factors and policies an institution can control, then that suggests there could be “levers of action” that community college leaders can pull to improve student outcomes. However, if variation is primarily explained by factors outside a college’s control – such as the characteristics of the students an institution serves – then accountability standards might just penalize community colleges for fulfilling their missions of providing access.

To shed light on this issue, we examine program-level data on earnings and student-loan repayment outcomes at more than 1,200 community colleges across the country. (Previous research has not studied program-level loan repayment due to a lack of available data.)

Among our findings:

• Net earnings – measured by the difference between the earnings of a typical student in a program, net of out-of-pocket costs, and typical earnings of a high school graduate – vary substantially by field of study. For instance, associate degrees in construction, engineering technology, and allied health have substantially higher net earnings than degrees in consumer science, education, and communications technology. While all community colleges offer a variety of credentials, the share of seats offered in high and low net earnings programs varies across institutions.

• Programs that enroll more underrepresented minorities (Black, Hispanic, and Native American) students tend to have worse track records, on average. However, we find that student demographic characteristics aren’t the major explanation for variation in program outcomes; rather, field of study explains most of the variation in earnings across programs and much of the variation in loan repayment.
• Colleges that enroll proportionally more underrepresented minority students tend to offer fewer programs in fields that lead to the highest post-college earnings. Specifically, at institutions with the lowest share of underrepresented minority students, almost a quarter of enrollment is in fields that offer the highest earnings, while only 7% of program offerings are in fields with the lowest earnings, on average. In contrast, at institutions with the most underrepresented minority students, only 16% of enrollment is in programs in the highest-earning fields, and 12% is in programs in the lowest-earning fields.
• The mix of programs at a college, tuition levels, and the presence of state policies (including performance-based funding that rewards colleges that are have large enrollments of underrepresented minorities or have bigger STEM and health programs) explain a significant share of the variation in post-college earnings and loan repayment.

On balance, we find that demographics are not destiny for community college program outcomes. Negative associations between program-level demographics and earnings shrink after we control for program-, institution-, and state-level factors. An important contributor to differences in outcomes between Black and white students at community colleges appears to be the programs of study that students are offered and encouraged to enroll in, rather than the characteristics of the students themselves.

The broad goals of accountability in higher education should be to provide incentives for schools to make changes that will improve student outcomes and, possibly, to exclude schools or programs that consistently produce poor outcomes from participating federal student aid programs. Community colleges are open-access institutions and generally serve students in the surrounding geographic area. If performance on these prospective metrics is a function of the types of students an institution serves, it is unlikely that linking incentives (or penalties) to performance will lead to desired goals of improving program quality. Instead, such accountability pressures may even serve to restrict access to higher education for students who could benefit the most.

Our findings, however, suggest that community colleges do have control over important factors that can improve students’ economic circumstances. For example, community colleges and state higher education leaders have some control over the types and mixture of programs they offer (or encourage students to enroll in), the mix of full-time/adjunct faculty they hire, spending on instruction and student services, and, at the state-level, the amount and structure of community college funding. As we demonstrate, these factors are correlated with student outcomes.

Read the full report.