Many students pursue higher education seeking economic opportunity, the prospect of a well-paying job motivating their studies despite the high price tag that college sometimes entails. A positive return on investment, or ROI, of college indicates that the monetary benefits outweigh the costs, but returns are often quite heterogenous. In a previous study, the Research Institute at Dallas College found that a large ROI gap exists between students from low-income and high-income families, defined as those earning $30,000 or less per year and more than $75,000 per year, respectively (Research Institute, 2022). Ten years after starting college, community college students in Texas from low-income families earned around $12,000 less per year than students from high-income families. Amplified over the course of their careers, these earnings differences contributed to a $282,000 gap in lifetime ROI by family income level. This aggregate finding is disconcerting, and it raises the question of which institutions, both in Texas and nationwide, are most effectively setting up low-income students for success and upward economic mobility. In this analytical brief, the Research Institute uses ROI to construct a new economic mobility index for two-year postsecondary institutions, defined as those which predominantly award associate degrees.i The brief is accompanied by an Economic Mobility Dashboard which includes a map, tables, and a list of two-year schools organized into tiers by this index, coined the EMI2. This new index builds upon past work on intergenerational mobility (Chetty et al., 2020), on the ROI of low-income students (Carnevale et al., 2022), and most closely on economic mobility at four-year institutions, being based on an existing Economic Mobility Index, the EMI (Itzkowitz, 2022a).
The two-year postsecondary sector serves millions of students, many from disadvantaged backgrounds, making it essential to understanding how higher education can facilitate economic mobility. Nearly half of all undergraduate students in recent years were enrolled at a community college at some point during their educational endeavors (Community College Research Center, 2022), and the majority of two-year college students who receive federal financial aid (those reflected in the College Scorecard) come from low-income families. Whereas the EMI evaluates four-year institutions based on both a measure of their ROI and their percent of Pell students enrolled, different criteria are needed to evaluate two-year institutions, in part because the populations two-year institutions serve are usually outside their locus of control. Most two-year institutions have an open admissions policy, enrolling students from their locale with little or no selectivity. Two-year college students are a diverse population with varied pathways through college, typically with significant financial need. Some two-year students seek to transfer, others to earn a credential, but almost all are motivated by the potential for incremental improvements in their economic wellbeing at an affordable cost. The EMI2 is designed to account for the unique characteristics and circumstances of two-year college students and the institutions in which they are enrolled.
Much like a course grade that assigns weights to categories like homework and exams to assess the performance of a student, the EMI2 uses the following three variables to assign a 0-100 grade to two-year postsecondary institutions to gauge how well they foster upward mobility:
- Ten-year ROI of low-income students (above state-level high school graduate earnings)
- Student loan debt of low-income students (original amount of principal upon entering repayment)
- Share of low-income students who complete a credential or transfer to a four-year college (in four or fewer years)
In calculating the EMI2, each variable is normalized to a 0-100 scale and given equal weight. The variables are curved using an inclusive percentile rank such that the institution with the best outcome among all peers earns a 100. For example, Dallas College earns a score of 78 for ROI of low-income students because its ten-year ROI for low-income students ($45,295) is greater than or equal to the ROI for low-income students at around 78% of all other two-year institutions. The median debt of low-income students at Dallas College is $5,966, for which it earns a score of 76. The share of low-income students who complete a credential or transfer to a four-year institution within four years of enrolling at Dallas College is 25.8%, for which it earns a score of 31. These component scores indicate where an institution is doing well relative to its peers and where it can improve; scores below 50 are below the median, and those above 50 are above it. Dallas College does relatively well with respect to ROI and debt, but less so for completion and transfer rates, resulting in a final EMI2 score of 62, the average of its three component scores. Figure 1 shows the formula for EMI2, using Dallas College as an example to demonstrate how it is calculated.
Figure 1: Economic Mobility Index for Two-Year Institutions (EMI2) Calculation Method
- For each two-year college with data available, the 10-year ROI, loan debt, and 4-year transfer and/or credential completion rates of low-income students are calculated. For example, for low-income students at Dallas College, 10-year ROI = $45,295. Their completion and transfer rates are 25.8% and their loan debt is $5,966.
- A percentile rank is taken across all two-year colleges for each factor (ROI, debt, transfer/completion). This produces a 0-100 score per factor for each two-year college. For example, in the distribution of factors by 2-year colleges, Dallas College ranks at the following percentiles: ROI = 78th percentile, Debt = 76th percentile, and Completion and Transfer Rates = 31st percentile.
- A college’s EMI2 equals the average of the percentile ranks of each of its factors. A college’s tier equals the quintile of its EMI2 compared to the EMI2 of all other two-year colleges. Tier 1 is the top 20%, Tier 3 is the middle 20%, and Tier 5 is the bottom 20%. As an example, for Dallas College, EMI2 = the average of 78, 76, and 31, which is 62. An EMI2 of 62 ranks 187th out of 789 two-year colleges, which is in the top 24%. Hence, Dallas College is in Tier 2.
Notes: Each component score is measured using an inclusive percentile rank among all two-year peers. ROI is the ten-year net present value of college for low-income students, calculated based on their median earnings, average net price, and the average state-level earnings of a high school graduate with no college, using a 2% discount rate. Debt is the original amount of loan principal for low-income students upon entering repayment. Completion or transfer rate is the percent of low-income students who complete a credential or transfer to a four-year institution within four years of starting college. Dallas College’s EMI2 score of 62 ranks 187th of 789 two-year institutions in the United States, placing it within the second quintile for economic mobility among its peers. It ranks 18th among 57 two-year institutions in Texas. Calculations use data from the U.S. Department of Education’s College Scorecard and the U.S. Census Bureau’s American Community Survey.
The Research Institute calculated the EMI2 for 789 two-year postsecondary institutions in the United States—all those with low-income student earnings, net price, debt, completion rate, and transfer rate data in the College Scorecard. All data used were taken from the College Scorecard, except for high school graduate earnings data, which were used as an indirect cost in calculating return on investment. Average high school graduate earnings by age and state were taken from the American Community Survey’s 2020 five-year estimates. When analyzing the data, the highest EMI2 observed was 94.0, and the lowest was 8.6.ii After computing the EMI2 for each two-year institution and ranking them by EMI2, the institutions were then assigned to five tiers or quintiles. The 20% with the highest rankings were assigned to Tier 1, the next 20% to Tier 2, then Tiers 3, 4, and 5. This smoothing approach using tiers mirrors what has been done for four-year institutions (Itzkowitz, 2022b), the idea being that—within a tier—institutions do a similar job of fostering economic mobility, but outcomes may differ more substantially across tiers. For example, two-year schools in Tier 1 have scores which range from 94.0 to 63.3, while those in Tier 5 range from 36.3 to 8.6. More insightful than the EMI2 values themselves, though, are how the component scores and the experience of low-income students as a whole vary by tier.
Components of the EMI2
The average value of each component of the EMI2 changes from Tier 1 to Tier 5, as shown in Table 1. While averages will not perfectly apply to every low-income student, the disparities in outcomes between Tier 1 and Tier 5 are striking and represent tangible differences in economic mobility. For instance, the average ten-year ROI of a low-income student ranges from a gain of $61,175 in Tier 1 to a loss of $12,846 in Tier 5.iii That ROI of $61,175 in Tier 1 a decade after college, when subtracting both the costs of college and foregone earnings, could bring significant benefits to student from a low-income family if those dollars are used to start a business, cover housing or car payments, or invest in further education or savings. At the opposite end of the spectrum, the average low-income student at a Tier 5 school might actually be worse off than they could have been had they never attended college—at $12,846 in the red—ten years after enrolling. This does not imply that enrollment at a Tier 5 institution never pays off, just that the cost is too high and the median earnings too low for that to happen within ten years for many of these students. As a result, low-income students at Tier 5 institutions will often not have the luxury of financial liquidity to pursue decisions that support their upward mobility until long after leaving college.
Table 1: Components of the Economic Mobility Index by Tier
|Economic Mobility Index (EMI2)
|Ten-Year ROI of Low-Income Students
|Loan Debt of Low-Income Students
|Percent of Low-Income Students Who Complete a Credential or Transfer
Within Four Years of College Entry
Notes: Values shown are unweighted averages of 158 two-year institutions in each tier (157 institutions in Tier 5). Calculations use data from the U.S. Department of Education’s College Scorecard and the U.S. Census Bureau’s American Community Survey.
Average student loan debt for low-income students follows a similar pattern, ranging from $7,391 in Tier 1 to $10,398 in Tier 5, with debt measured as the original amount of principal upon entering repayment. Student debt is not always problematic. Loan financing enables many students the opportunity to access higher education who would not otherwise be able to do so, and loans can provide students with a measure of financial security that allows them to focus on finishing their studies rather than making their next tuition payment (Research Institute, 2022b). However, excessive debt is a major financial burden that can endanger a student’s future. Having low-to-manageable levels of student loan debt is an important contributor to economic mobility, as it frees up a student’s capacity to borrow money and ultimately advance their lives. Low-income students at Tier 1 institutions do hold loan debt, but at a ratio of 18% relative to their average earnings of $40,405 per year, or 12% relative to their ROI. In contrast, low-income students at Tier 5 institutions have average annual earnings of $31,074, negative ten-year ROI, and a debt-to-income ratio of 33% from student debt, possibly limiting their ability to apply for a loan or mortgage. Repayment rates for low-income students also vary by EMI2 tier. Seven years after entry to college, 50.4% of low-income students at Tier 1 institutions are not in default and have loan balances which have declined, compared to 36.1% of low-income students at Tier 5 institutions. Not only do students at Tier 1 institutions hold less debt, but they are also able to repay their loans at higher rates, likely due to higher earnings—the indirect result of increased completion rates and better employment prospects.
The third and final component of the EMI2 measures the percent of low-income students who complete a credential and/or transfer to a four-year institution within four years of starting college. While having some college experience but no credential can be valuable, credentials like an associate degree or certificate enable students to signal their skills to prospective employers. Transfer to a four-year institution holds even greater promise, given the comparatively high ROI of bachelor’s and more advanced degrees. At Tier 1 schools, the percent of low-income students who complete a credential or transfer vertically within four years of college entry is 40.2%, compared to 26.5% for low-income students at Tier 5 schools. This difference in completion and transfer rates likely explains at least part of the differences in earnings and ROI of low-income students across tiers, since people with a credential tend to earn more than those with some college and no degree on average. Having said this, the completion or transfer rate metric does highlight a limitation of the EMI2—the index and tiers are all constructed based on relative performance, not absolute performance. Even the average outcome at Tier 1 could be improved. Ideally, the majority of low-income students who pursue a two-year education would complete a credential or transfer vertically within four years of college entry, but much work remains to raise completion rates and ease the transfer process at all tiers. The reality is that most low-income students at two-year schools do not earn a credential or transfer vertically within four years of entry, even at the schools where their prospects of upward mobility are the greatest.
Other Outcomes of Low-Income Students
Table 2 presents additional data which show how the outcomes of low-income students vary by tier. The results are both affirming and concerning. On a positive note, it is reassuring to see that a two-year college experience pays off on average for low-income students, regardless of tier, even if the number of years for students to recoup their costs varies. At every tier, the 40-year ROI of low-income students is positive, and the earnings of low-income students ten years after college entry are above $30,000—the cutoff the College Scorecard uses to define low-income, which bodes well from an intergenerational perspective. Low-income students at two-year schools of all tiers also command an earnings premium, or extra wages above those of a high school graduate, indicating the skills or credentials gained in college are directly supporting their salaries.iv The earnings data used for these calculations are based on all low-income students, whether they withdraw, transfer, or complete, so earnings may be even higher for those who do finish a degree. In more sobering news, there are real gaps in the financial outcomes of low-income students from Tier 1 to Tier 5. For example, the 40-year ROI of college for low-income students is $255,762 at Tier 1, but only $2,948 at Tier 5, producing a massive $252,815 lifetime shortfall in ROI. Earnings differences are the main reason for this, but costs are also a factor. The net price of college for low-income students—which includes tuition, fees, supplies, and living expenses, and subtracts scholarships and grants—increases from around $8,000 at Tier 1, 2, and 3 institutions to $11,661 at Tier 4 institutions and $13,774 at Tier 5 institutions. Tier 5 institutions have the highest average costs of attendance and tuition intake per student. On an annual basis, these cost differences matter, especially for two-year college students. Ultimately, college is more expensive at Tier 5 institutions, even though the earnings outcomes are weaker.
Table 2: Low-Income Student Outcomes by Economic Mobility Tier
|40-Year ROI of Low-Income Students
|Earnings of Low-Income Students, Ten Years After College Entry
|Earnings Premium of Low-Income Students, Ten Years After College Entry
|Annual Net Price of College for Low-Income Students
|Seven-Year Repayment Rate for Low-Income Students
|Years for Low-Income Students to Recoup Educational Investment
Notes: Values shown are unweighted averages of 158 two-year institutions in each tier (157 institutions in Tier 5). Calculations use data from the U.S. Department of Education’s College Scorecard and the U.S. Census Bureau’s American Community Survey.
Student Demographics by Tier
Because the EMI2 does not inherently reward institutions for serving a higher number or proportion of low-income students, a question worth considering is how low-income students are distributed across institutions by economic mobility tier. Do low-income students attend all tiers of institutions evenly, or are they concentrated in one tier or another? For each institution, the College Scorecard reports the percentage of certificate/degree-seeking undergraduate students who are Pell recipients, which can be used as a proxy for the percentage who are low-income.v Table 3 shows the distribution of all students and Pell recipients across EMI2 tiers.
Table 3: Distribution of Students by Pell-Recipient Status and Economic Mobility Tier
|Count of Institutions
|Total Number of Certificate/Degree-Seeking Undergraduate Students
|Average Count of Students per Institution
|Distribution of All Students
|Distribution of All Pell-Recipient Students
|Share of Undergraduate Students in Tier Who are Pell Recipients
Notes: The distribution of students reflects counts across tiers. Calculations use data from the U.S. Department of Education’s College Scorecard.
Institution Size and Pell Recipients
The total number of students enrolled varies by tier even though each tier contains 158 (or 157) two-year institutions, indicating that larger institutions tend to produce stronger mobility outcomes, at least on average. Around 3.6 million undergraduate students are enrolled at the 789 two-year institutions ranked by the EMI2, with more than half of these students enrolled at Tier 1 and 2 institutions and less than one third enrolled at Tier 4 and 5 institutions. Based on the total number of students enrolled by tier and the percent of Pell students enrolled by tier, the total count of Pell students enrolled at all 789 institutions is around 1.2 million students, meaning around one third of all students at two-year institutions receive Pell aid. Of these Pell recipients, 23.6% are enrolled at Tier 1 schools, 25.4% are enrolled at Tier 2 schools, 17.2% are at Tier 3 schools, 19.5% are at Tier 4 schools, and 14.2% are at Tier 5 schools. Relative to their size, Tier 5 institutions serve the highest proportions of Pell students, but they also serve lower counts of Pell students than do institutions of any other tier. On the one hand, it bodes well for prospects of economic mobility that more Pell students are enrolled at Tier 1 and 2 schools than at Tier 4 and 5 schools, since the former are associated with higher ROI, lower debt, and higher completion and transfer rates. On the other hand, more Pell students are enrolled at Tier 5 institutions than would be expected based on the size of those institutions. In other words, a disproportionate number of Pell students enroll at lower-tier schools, raising a question of what draws students there, especially given that the EMI2 shows those lower-tier schools may be less effective at spurring mobility.
Student Race and Ethnicity
Whether race and ethnicity affect student enrollment patterns across economic mobility tiers is another crucial question. Examining the demographic distribution of students by tier may illuminate inequities in the outcomes of low-income students from minoritized groups (Postsecondary Value Commission, 2021). Table 4 shows the distribution of students across tiers by race, ethnicity, and nationality (specifically, nonresident alien status, defined according to the visa and citizenship information on record at an institution). To simplify the interpretation of this table, Tiers 1 and 2 and Tiers 4 and 5 are pooled together, respectively. Institutions at Tiers 1 and 2 represent the top 40% in terms of economic mobility, those at Tiers 4 and 5 represent the bottom 40%, and those at Tier 3 represent the middle 20%. The values in Table 4 can be compared to the distribution of all students to examine where demographic groups are under- or overrepresented relative to the enrollment patterns of all students. For example, students who are Hispanic, Asian, or nonresident aliens enroll in Tier 1 and 2 institutions at higher rates than all students as a whole and enroll in Tier 4 and 5 institutions at lower rates than all students as a whole. Students who are Black, White, or two or more races follow an opposite pattern, being slightly overrepresented in Tiers 4 and 5 and underrepresented in Tiers 1 and 2. Students who identify as American Indian or Alaska Native, Native Hawaiian or Pacific Islander, or are of an unknown race and ethnicity have the most dissonant distribution across tiers relative to the overall population; these students are underrepresented in Tier 1 and 2 institutions and overrepresented in Tier 4 and 5 institutions. In the most extreme example, the gap between expected and actual enrollment exceeds ten percentage points: 38.3% of American Indian or Alaska Native students enroll at Tier 1 and 2 institutions, whereas 51.7% of all students enroll at Tier 1 and 2 institutions. Although some variation in enrollment patterns is to be expected, some of the larger disparities in Table 4 are not. Fewer students at Tier 1 and 2 institutions among groups with higher rates of poverty and lower income levels could perpetuate and exacerbate existing inequalities. As an example, Native Americans have the highest poverty rate of any racial/ethnic group in the country (20% for American Indian and Alaska Native alone; U.S. Census Bureau, 2020), and they are the only racial/ethnic group to have their highest proportion of students in Tiers 4 and 5 for economic mobility (Table 4), which poses a threat to intergenerational mobility.
Table 4: Distribution of Students by Race and Ethnicity and Economic Mobility Tier
||Tiers 1 and 2
||Tiers 4 and 5
|Hispanic or Latino
|Black or African American
|American Indian or Alaska Native
|Native Hawaiian or Other Pacific Islander
|Two or More Races
|Unknown Race and Ethnicity
Notes: Tiers 1 and 2 and Tiers 4 and 5 are pooled together, respectively, to simplify this table. Race and ethnicity categories are presented as reported by the Integrated Postsecondary Education Data System (IPEDS). Calculations use data from the College Scorecard, which attributes its race and ethnicity data to IPEDS.
Institutional Characteristics and Federal Aid
Because two-year institutions of higher tiers tend to have larger student bodies than those of lower tiers, one must wonder whether greater access to resources and funding are, in part, an underlying cause behind differences in outcomes. Factors like whether two-year institutions are public or private and how much federal funding is received per student may inform the outcomes realized by low-income students at those institutions. Table 5 highlights how select institutional characteristics, including total Title IV aid, vary across economic mobility tiers.vi Additional attributes, like minority-serving status and the prevalence of fields of study by EMI2 tier, are not shown here but can be further explored within the accompanying Economic Mobility Dashboard.
Table 5: Institutional Characteristics and Financial Aid by Economic Mobility Tier
|Distribution of Community Colleges
|Distribution of Private Nonprofits
|Distribution of Private For-Profits
|Count of Institutions with Title IV Aid Data
|Total Title IV Aid Volume
|Total Title IV Aid per Pell Student
|Title IV Grant Aid per Pell Student
|Title IV Loan Aid per Pell Student
|Title IV Campus-Based Aid per Pell Student
Note: Calculations use data from the U.S. Department of Education’s College Scorecard and Accreditor Data File.
Public, Private Nonprofit, or Private For-Profit Status
Of the 789 two-year institutions included in calculating the EMI2, 607 were public (community colleges), 68 were private nonprofit, and 114 were private for-profit. As Table 5 shows, the distribution of institutions by public or private status across EMI2 tiers is far from uniform. Instead of seeing an equal percentage of each kind of each institution in each tier (or 20% across the table), community colleges outperform their private counterparts, with higher-than-expected shares of community colleges in Tiers 1, 2, and 3 and lower shares in Tiers 4 and 5. In contrast to public two-years, private nonprofit two-years are concentrated in Tier 5, and private for-profit two-years are concentrated in Tiers 4 and 5. This is not to say that particular private institutions cannot produce breakthrough outcomes for their low-income students, but, on the whole, publics tend to do better than privates for economic mobility in the two-year sector. An interconnected issue is educational access among two-year institutions. While community colleges typically have an open admissions policy, private institutions are sometimes more selective in whom they accept, potentially limiting their reach to low-income students. Of the 789 two-year institutions included in calculating the EMI2, 717 (or 90.1%) were open access and 57 (or 7.2%) had acceptance rates below 90%, with the lowest rates observed being just over 20%. Some private two-year institutions specialize in high-demand programs like nursing, giving additional access to students when public colleges are at capacity. However, with average costs (and hence debt) being higher at private colleges than public ones, even when these programs are of a high quality, it may take students longer to recoup their expenses and secure a positive ROI.
Federal Financial Aid
While differences in local and state resources may affect mobility outcomes, access to more federal Title IV aid does not appear to explain why higher-tier institutions produce stronger ROI, debt, and completion or transfer rate outcomes for low-income students. Title IV aid disbursements at an institution include programs such as Stafford, Parent PLUS, Pell, Perkins, and Federal Work Study. Among institutions for which aid data were available, the magnitude of funding received was similar at Tier 1 and Tier 4, at around $2.3 billion total, yet those dollars are dispersed among fewer institutions at Tier 4 (138) compared to Tier 1 (147). The discrepancy in federal financial aid received only widens when calculating aid per student, or per Pell recipient, since higher-tier institutions tend to serve more students than lower-tier ones. When dividing total aid volume by the number of Pell recipients at institutions in each tier, the amount of total aid per Pell student ranges from $8,248 at Tier 1 to $12,036 at Tier 5. This result is alarming, since it suggests that the institutions that are least effective at supporting the economic mobility of their low-income students are also the ones receiving the most federal aid. When partitioning aid into grants, loans, and campus-based categories, a clearer picture begins to emerge. Grant and campus-based aid do not vary as widely across tiers as loan-based aid does. The bulk of additional funding received at lower-tier two-year institutions seems to be driven by students at those institutions taking out larger loans. Loan aid ranges from $2,439 per Pell student at Tier 2 institutions to $6,247 at Tier 5 institutions. Before considering aid, the average cost of attendance at Tier 1 and 2 institutions is around $15,500, while the average cost at Tier 4 and 5 institutions is around $20,000, and loans are a way students bridge this gap in costs. Greater costs of attendance, and in turn greater sums of money borrowed to pay those costs, in part explain why low-income students at lower tiers tend to hold more debt than those at higher tiers. Another dimension to differences in amounts of loan aid across tiers is the concentration of two-year for-profit colleges in Tiers 4 and 5. Many for-profit institutions rely on federal dollars as a significant revenue stream and recruit Pell students accordingly. In recent years, more than half of all for-profit colleges have seen more than 70% of their total revenue come from Title IV funds (Kelchen, 2017).
Upward mobility may manifest itself over a lifetime or even across multiple generations, but only with the necessary initial conditions. The journey of financial advancement and empowerment for a two-year college student is challenging, but low levels of student loan debt, positive returns in the first decade after college, and good odds of completion or transfer place students in the best position to turn early economic success into long-lasting benefits. In this brief, the Research Institute at Dallas College has shared a new way to measure how well two-year postsecondary institutions serve low-income students and stimulate economic mobility, the EMI2. In illuminating the wide range of outcomes realized by low-income students across tiers of institutions, the EMI2 helps to identify which two-year institutions are or are not successfully cultivating a foundation for economic mobility and—through its three component scores—reveals the areas in which all two-year institutions can continue to develop and improve. A few recommendations from the EMI2 for practitioners, policymakers, and researchers follow.
For practitioners at two-year institutions, reviewing the data is essential. A critical reminder is that the EMI2 is a relative indicator of economic mobility rather than an absolute one. Ranking in Tier 1 or 2 indicates that a college’s outcomes are favorable relative to other two-year colleges, but even relatively favorable outcomes may need improvement. Institutional leaders at Tier 1 and 2 colleges should continue to monitor internal data, seek out external data on the outcomes of their low-income students as needed, and validate outcomes using credible external benchmarks and sources. MIT’s Living Wage Calculator is one such tool which could be used to assess the post-college wages of low-income students irrespective of peer comparisons. The Labor Market Intelligence Center at Dallas College uses estimates from this calculator for Dallas County as a resource for students and community members on its own interactive site. Institutional leaders at lower-tier institutions can benefit from seeking out external data sources as well, but they should also reflect on which of their EMI2 component scores have the lowest percentile ranks and why, an exercise that can be undertaken using the Research Institute’s Economic Mobility Dashboard. Looking at local peers is an especially fruitful step because they may face similar labor market conditions. If peer institutions in a region all rank at lower tiers, then the EMI2 may be more indicative of systemic issues, like lower regional returns to college, rather than something specific to one institution.
For policymakers, a key takeaway from this brief is that community colleges remain a critical lever for expanding access to higher education for low-income students. Community colleges tend to produce positive returns for low-income students who would otherwise not pursue college, despite heterogeneity across tiers. This finding aligns with recent causal research conducted using granular administrative data in Texas, in which disadvantaged high school youth were found to benefit on net from greater access to two-year institutions since they would not have gone to college otherwise, with relatively few students diverted away from four-year institutions in favor of two-year ones (Mountjoy, 2022). Other noteworthy findings from this brief on the EMI2 are the distribution of institutions by size, by public or private status, and the allocation of federal aid by economic mobility tier. First, on institutional size—larger institutions ranking well on the EMI2 may not be surprising, since larger institutions often benefit from greater tuition intake, local property taxes, and state funding, even though they were not found to receive more federal financial aid. Although the Research Institute’s analysis found a fairly even split of colleges by tier across urban and rural lines, the gaps in size between the highest and lowest ranked colleges stand out, raising the question of what policy steps might be needed to support smaller colleges. Second, on public or private status—private two-years make up a disproportionate share of institutions at lower tiers, evoking familiar narratives of college quality, governance of for-profits, and gainful employment. While some private institutions defy this trend, real scrutiny is warranted for institutions in Tier 5 with negative ROI ten years after college entry. Third, on allocation of aid—while grant aid is fairly evenly distributed, a further worry for Tier 5 colleges based on the review of Title IV aid volumes presented in this brief is that low-income students at Tier 5 colleges borrow greater sums of federal loans than low-income students at any other tier.
Finally, for researchers, the Research Institute at Dallas College hopes the EMI2 sparks discussion on a subset of institutions which are often overlooked in existing studies and college rankings—namely, community colleges and other two-year institutions. The EMI2 uses a simple methodology and parsimonious set of variables which lends itself to future iteration. Data used to construct the EMI2 are publicly available and can be downloaded here. The role of major or field of study stands out as an important area for future study, particularly as additional years of data become available through the College Scorecard and other sources on field-specific post-college earnings. Far from an afterthought, two-year colleges should occupy a central role in understanding how higher education propels economic mobility and where more work is needed in this effort. As the EMI2 shows, the two-year experience is heterogeneous, and ambiguity remains in how well two-year institutions are fostering economic mobility as a whole. All in all, the EMI2 gives cause for both hope and further introspection for two-year postsecondary education. Exemplars exist which demonstrate that two-year colleges can still be incubators of mobility and prosperity, but any vision of education as a great economic equalizer remains a work in progress.
Variable Selection and Discussion
The EMI2 is based on three components: ROI, debt, and completion or transfer rates, but these were not the only variables considered in its development. In constructing the EMI2, the Research Institute considered all data available through the College Scorecard which described the outcomes of low-income students, as well as a few additional county-level data sources; data not directly used in the EMI2’s calculation are included in the Economic Mobility Dashboard. The College Scorecard publishes a limited set of data on low-income students. In addition to what was included in the EMI2, completion and transfer rates are also available 2, 6, and 8 years after college entry. Numbers of first-time, full-time (FTFT) Title IV low-income students per institution are also available, from which percentages out of all FTFT Title IV students can be calculated, but FTFT Title IV students were found to only be around 10% of undergraduates in the College Scorecard data. The ROI component of the EMI2 uses median earnings and net price data for low-income students, and the 10-year ROI was chosen since it reflects as much earnings data as possible (6, 8, and 10 years after college entry) while making no assumptions about future earnings. The low-income debt component of the EMI2 is taken directly from the College Scorecard, with no similar variables available. The 4-year completion or transfer rate component is used since it represents 200% of normal completion time for an associate degree; this component rewards institutions in which students complete or transfer in a timely manner, while not being overly stringent and demanding all students complete or transfer within 2 years. Another consideration was using the counts of students not enrolled in further study who were working and not working one year after graduation as a proxy for initial employment rates of graduates, but these data were not available for low-income students specifically, missing data were an issue, and average rates for all students across all tiers of institutions were above 90%. Another review the Research Institute conducted was on the distribution of institutions by their locale (city, suburb, town, or rural), out of concern that urbanization might be affecting how institutions were ranked given that many larger institutions ranked in higher EMI2 tiers.
A major point of deliberation in designing the EMI2 was whether two-year institutions should be assessed only on the quality of outcomes realized by the low-income students they serve, or also on the quantity of low-income students they serve. Ultimately, the decision was made for the EMI2 to not include intrinsic weighting for quantity; only the quality of outcomes affects how institutions stack up. Criteria like the percent or number of low-income (or Pell) students are sometimes used to assess how well four-year institutions foster economic mobility. While such measures may capture the selectivity of a four-year institution, two-year colleges usually have a student body derived more from open admissions and local demographics than prestige or exclusivity. Using the percent of low-income students served might produce a two-year mobility index which favors geographies with larger low-income populations, something often outside the control of that institution. Likewise, using the count of low-income students served could yield a mobility index which favors larger institutions, perhaps because they serve large, urban counties, again, something beyond the control of most two-year institutions. Using Pell recipients to proxy for low-income students would result in these same biases and introduce the additional issues that not all low-income students complete the FAFSA and that low-income students who are undocumented immigrants or foreign nationals are typically not Pell-eligible.
Another consideration in developing the EMI2 was the extent to which the outcomes of low-income students can be attributed to the institutions those students are enrolled at, and/or whether outcomes were governed by outside socioeconomic factors. As a way of controlling for county characteristics, the Research Institute considered two additional data sources from the U.S. Census Bureau: the percent of households in a county with annual income below $35,000 per year from the American Community Survey (ACS), and county-level poverty and child poverty rates from the Small Area Income and Poverty Estimate (SAIPE) Program. The share of low-income students at an institution had a low degree of correlation with any of these county characteristics (with correlation coefficients less than 0.3). Including a ratio of the share of low-income students to any of these county rates seemed to bolster the relative rankings of affluent (low poverty rate) counties. Some possible explanations for this are a culture which emphasizes going to college in affluent counties, in-migration from less-affluent counties to more-affluent counties to pursue community college, or that social capital significantly affects economic mobility in those counties. Although these explanations are hypotheses, the latter idea is grounded in recent research, with one form of social capital, economic connectedness—or the share of high-income friends among people with low income—being one of the strongest predictors of mobility to date (Chetty et al., 2022). The EMI2 supports the idea that economic connectedness is a possible determinant of mobility, given that the institutions in Tiers 1 and 2—where low-income students realize the best outcomes—are also the ones with the lowest proportions of low-income students relative to all other students.
Calculating the ROI of Low-Income Students
To calculate the return on investment (ROI) of low-income students by institution, the following data are used: (1) for earnings—median earnings of low-income students 6, 8, and 10 years after college entry from the College Scorecard based on the 2007-08 and 2008-09 pooled award year cohorts, (2) for direct costs—the average net price low-income students pay for college from the College Scorecard based on the 2020-2021 academic year, and (3) for indirect costs—the average earnings by age and state of high school graduates with no college from the American Community Survey’s 2020 five-year estimates. Notably, College Scorecard earnings data cover all low-income students who enter an institution and receive federal aid, not just those who complete or transfer, but also those who withdraw. All values are presented in 2020 dollars.
ROI is estimated as the net present value of earnings minus direct and indirect costs, assuming a 2% discount rate, immediate college-going after high school, direct costs paid upfront while in college, and three years spent in college. To estimate 10-year ROI as used in the EMI2, earnings of low-income students in years 4, 5, 7, and 9 after college entry are interpolated linearly based on earnings data for years 6, 8, and 10 after college entry. To estimate 40-year ROI as mentioned in this brief, a further assumption is made that earnings growth is flat from 10 years after college entry onward, to produce a conservative estimate of the value of college. This approach to calculating ROI is adapted from existing methodology used by the Georgetown University Center on Education and the Workforce (Carnevale et al., 2019).
Carnevale, A. P., Cheah, B., & Van Der Werf, M. (2019). A first try at ROI: Ranking 4,500 colleges. Georgetown University Center on Education and the Workforce. https://cew.georgetown.edu/cew-reports/collegeroi/
Carnevale, A. P., Cheah, B., & Van Der Werf, M. (2022). The colleges where low-income students get the highest ROI. Georgetown University Center on Education and the Workforce. https://cew.georgetown.edu/cew-reports/lowincome/
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Chetty, R., Friedman, J. N., Saez, E., Turner, N., & Yagan, D. (2020). Income segregation and intergenerational mobility across colleges in the United States. The Quarterly Journal of Economics, 135(3), 1567–1633. https://doi.org/10.1093/qje/qjaa005
Chetty, R., Jackson, M. O., Kuchler, T., Stroebel, J., Hendren, N., Fluegge, R. B., Gong, S., Gonzalez, F., Grondin, A., Jacob, M., Johnston, D., Koenen, M., Laguna-Muggenburg, E., Mudekereza, F., Rutter, T., Thor, N., Townsend, W., Zhang, R., Bailey, M.,…Wernerfelt, N. (2022). Social capital I: Measurement and associations with economic mobility. Nature, 608, 108–121. https://doi.org/10.1038/s41586-022-04996-4
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Itzkowitz, M. (2022b, July 21). A new way of rating institutions of higher ed: Upgrading the economic mobility index. Third Way. https://www.thirdway.org/blog/a-new-way-of-rating-institutions-of-higher-ed-upgrading-the-economic-mobility-index
Kelchen, J. (2017, January 11). How much do for-profit colleges rely on federal funds? Brown Center Chalkboard, Brookings Institution. https://www.brookings.edu/blog/brown-center-chalkboard/2017/01/11/how-much-do-for-profit-colleges-rely-on-federal-funds/
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i Colleges which predominantly award associate degrees are those which award a greater number of associate degrees than any other credential levels (e.g., certificate, bachelor’s degree). These colleges also serve students who pursue credentials other than associate degrees, and the data used in analyzing the mobility outcomes of students at these colleges reflect all credential levels.
ii The highest possible EMI2 in theory would be 100, although this was not realized in the data. A hypothetical institution with an EMI2 of 100 would have—among all of its two-year peers—the highest ROI for low-income students, the lowest debt for low-income students, and the highest four-year completion or transfer rates for low-income students.
iii The Appendix and the Research Institute’s Return on Investment Dashboard contain additional details on the net present value methodology used to calculate the ten-year ROI of low-income students, which is one component of the EMI2.
iv To calculate the earnings premium, the average earnings at age 28 by state of high school graduates with no college from the American Community Survey’s 5-year 2020 estimates are subtracted from the median earnings of low-income students at an institution ten years after college entry from the College Scorecard.
v The percentage of Pell students at an institution is an imperfect proxy for the percentage of low-income students because not all low-income students complete the FAFSA, and low-income students who are undocumented immigrants or foreign nationals are typically not Pell-eligible.
vi To measure total Title IV aid volume, institutions included in the EMI2 were matched to the U.S. Department of Education’s Accreditor Data File using their Unit ID. Some institutions had multiple locations listed in the Accreditor Data File (without listing how many dollars went to each location), and some were not found in the Accreditor Data File at all, leaving 679 of 789 or 86% of two-year institutions with cleanly matched data on total federal financial aid volume.