No sector has more riding on the new college earnings test than community colleges. Students are betting on short-term credentials as a faster, cheaper path to a good job or a better one. More of them are placing that bet at a community college.
Community colleges enrolled about 750,000 certificate students last fall, up 28% in four years, with their overall enrollment growing 3.1% this year. Enrollment in undergraduate certificate programs grew 10% last spring, the most of any undergraduate credential. The new Workforce Pell program adds to that momentum for community college.
Until now, students couldn’t easily tell which programs pay off. A Texas study of more than 900,000 students shows why that matters.
Five years after enrolling at the state’s public two-year colleges, construction trades certificate students were about $48,000 ahead of similar peers who didn’t enroll. Information technology certificate students were about $21,000 behind their peers.
That’s about to change. Under a U.S. Education Department (ED) rule that took effect in July, college programs across the country face a new earnings test. It asks a simple question: Do graduates earn more than workers who stopped at a high school diploma?
A closer look
The test gets three things right.
First, it sets a fair floor. The department will look at the median earnings of a program’s graduates four years after they finish. It will compare those earnings with the median for working adults aged 25 to 34 with only a high school diploma. The comparison uses the college’s home state, or the nation if most students come from elsewhere.
A program that falls short in two of three consecutive years loses access to federal student loans. Before that happens, the college must warn current and prospective students that the program is at risk. The first results are expected by July 2027 and will reflect students who finished in 2020 and 2021, at the height of the pandemic.
This is a floor, not a ranking. It doesn’t tell students what to study. It says only that taxpayers shouldn’t finance programs that leave graduates no better off than if they hadn’t enrolled. Third Way reports that more than 90% of voters support that idea. The Institute for Higher Education Policy (IHEP) calls the rule an “important accountability safeguard.”
Second, it vindicates degrees. Early commentary warned that the test would drive students away from teaching and social services. The evidence says otherwise.
Third Way finds that more than 99% of bachelor’s degree programs and 98% of associate degree programs are expected to pass. An IHEP analysis finds that nearly all bachelor’s graduates in education and social work attended programs that clear the bar.
The Texas study points the same way. Fifteen years after enrolling, bachelor’s degree students were about $87,000 ahead of similar peers who didn’t attend college, even after subtracting tuition and the wages they gave up while in school. Associate degree students broke even by their seventh year and were about $25,000 ahead by their tenth. For a public that has grown skeptical of college, that is news worth hearing.
Third, it gives students a map of certificates, perhaps the test’s most useful contribution. Results here vary more than anywhere else in higher education.
IHEP finds that just over half of certificate holders (55%) attended programs that pass the test. Since nearly all degree programs pass, certificates account for about nine in 10 graduates of programs that fall short.
For community colleges, the news is mostly good. Public colleges produce about half of all graduates in the federal data but only 6% of graduates from programs that fall short. Most of the programs at risk are at for-profit institutions.
None of this is a verdict against certificates. It’s evidence that the field of study matters a great deal. Beyond construction, Texas students in technical trades, health and protective services also did well. IHEP finds that nearly every certificate holder in architecture and engineering attended a program that passes.
The college matters, too. In one state, graduates of the same vehicle maintenance certificate earn about $32,000 at one community college and nearly $67,000 at another.
Employers also see the value. In a survey of more than 3,000 hiring professionals, 91% said certificates are valuable for demonstrating skills. Students have lacked a way to tell a strong program from a weak one. The earnings test supplies it. A credential has value when it leads somewhere.
Keep in mind
Three issues deserve attention as the test takes effect.
First, many programs are too small to produce reportable earnings data. IHEP could analyze only about 28% of undergraduate programs for that reason. Students in the rest get no signal. One approach to closing that gap is the College Transparency Act, a bipartisan congressional proposal that would build a more complete federal data system.
Second, in some fields, low pay reflects the labor market more than training. Early childhood education is the clearest example. The better response is higher pay and lower program costs, not an exemption from the test.
Third, the test counts only graduates. The Texas study followed every enrolled student, including those who never finished. States can build that fuller picture with their own wage records.
The earnings test arrives just as Workforce Pell has begun sending federal grants to short-term programs. Yet many states still lack the data systems and oversight capacity to judge which programs deserve them. The test won’t fix that on its own. But it gives states a first look at which programs help students earn more and which don’t. It’s a starting point. “It is not a finish line,” IHEP’s Daniella Paradise told Inside Higher Ed.
5 steps to maximize the test
Community colleges and states can take five steps to make the most of the test.
- Check the data now. Before calculating earnings, ED will send each college a list of its completers and allow 60 days for corrections.
- Tie certificates to employers and work experience. Employers say practical experience is the most effective path from education to a job. Yet only 7% of institutions guarantee an internship, and only a third of two-year colleges offer project-based learning.
- Create certificates that stack. Each should count toward an associate degree and beyond, making it a stepping stone and not a stopping point. That way students never have to start over.
- Put results in front of students. High school counselors and college advisors should share them before students enroll. That’s no small task. School counselors carry an average of 372 students each, and two-year college advisors carry about 351.
- Use results to guide state decisions. States should publish program results from their wage records and use them when deciding which short-term programs to support, including through Workforce Pell. Texas and Virginia already evaluate the return on short-term credentials.
The earnings test won’t settle every question about the value of college. It does something more basic. It tells students where a program tends to lead. With certificate enrollment rising fast, especially at community colleges, that information arrives at the right time.
