Pivotal moment for community colleges as federal and state officials tie funding to the employment of graduates.
Fewer and fewer students are attending college generally, but the decline has been cataclysmic for many community colleges. In fall 2023, 13 percent fewer students enrolled in community colleges relative to fall 2019. Several states, including Colorado, Mississippi, and West Virginia, have seen collapses of 25 percent or more.
Some states, including Michigan, are mulling making community college tuition-free. At the national level, Democrats have not given up on free community college, even though President Biden’s $109 billion proposal to eliminate community college tuition didn’t make much headway on the Hill. But free tuition plans fundamentally misunderstand the problems facing the sector.
Community college is already quite affordable. Most community college students pay nothing in tuition and fees after financial aid. Just 15 percent of community college freshmen take out a student loan.
The main drawback of community college is not price, but quality. Just 43 percent of students who begin their studies at a community college complete any degree or certificate, while an even smaller proportion successfully transfer and earn a bachelor’s degree. Six years after they first enroll, the median community college student earns $33,000 per year, compared to $45,000 for students who choose public four-year colleges. At that income level, the U.S. Department of Education deems most recent community college students too poor to repay their federal student loans.
For most students, the key reason for attending college is economic. Students want to improve their chances of landing a job that offers a decent salary and opportunities for career growth. But too often, colleges have broken that implicit promise to students—witness the legions of borrowers who struggle to repay the student loans they hoped would lead to a better life.
Colleges often claim they don’t have control over their graduates’ earnings. But colleges can change the classes and programs they offer to align students’ education with the skills required for the jobs of tomorrow. For instance, community college students with a degree in health care earn a median salary of $54,000 three years after graduation, according to the College Scorecard. Those with a liberal arts degree earn just $30,000.
But community colleges often don’t update their curricula to changing labor market needs, or student interests. A study by Federal Trade Commission economist Michel Grosz examined community colleges’ responses to local increases in demand for workers in certain occupations. When labor market demand increased, more students tended to enroll in the relevant program at the local community college. But the colleges did not add course sections to increase capacity in the relevant programs, nor did they hire more instructors in the field.
That’s one reason many governments, which supply 76 percent of community colleges’ revenue, believe it’s no longer enough simply to increase community college funding without additional strings. Policymakers must also change the incentives facing schools, to align them with students’ economic interests.
Several states are leading on the issue. Since 2013, Texas has based state funding for one of its community colleges entirely on what students earn after graduation; this led the school to revamp its programs, generating a 26 percent boost in graduates’ starting salaries. The state is moving ahead with a plan to tie funding for the rest of the state’s community colleges to the number of graduates who boost their wages above the high school level, among other metrics.
In North Carolina, the state’s community college presidents have endorsed a proposal to pay schools bonuses for each student they enroll in courses associated with high-wage occupations. And, in Pennsylvania, Governor Josh Shapiro has put forward a bold plan to fund state colleges and universities based on outcomes, with extra incentives for schools that produce degrees in high-demand sectors of the workforce.
At the federal level, Republicans on the House Education and Workforce Committee recently advanced a bill that would provide new direct funding for schools with high graduation rates, reasonable tuition, and solid labor market outcomes. Community colleges with strong vocational programs are well-positioned to benefit.
One can debate the merits of each individual policy, but the underlying concept is sound. If we want better outcomes from colleges, we must give them a direct financial stake in student success.
Community colleges that pivot towards programs with more economic value can prosper; indeed, community colleges with a vocational focus have already recovered from the enrollment losses they suffered during the pandemic. Policymakers’ increased focus on funding for outcomes should only sharpen the incentives to make this pivot. Many community college advocates see the recent enrollment collapse as a crisis. They should also see it as an opportunity.
