Colleges and universities in Puerto Rico outperform the rest of the nation on earnings premiums for low-income students

By: Sami R. Nour, Deborah Santiago, Emily Labandera, and Cassandra Arroyo, Excelencia in Education

Earning a college education pays, but especially in Puerto Rico. Consider that ten years after entering a postsecondary institution in Puerto Rico, students from low-income backgrounds have much higher incomes than local 25–34 year-olds whose highest education is a high school diploma. Further, on average, that earnings premium is around 67% higher — much higher than the 43% earnings premium provided by institutions in the 50 states and the District of Columbia. That earnings premium is also higher than all but five other locations in the United States. Institutions in Puerto Rico also enroll Pell students (often used as a proxy for low income) at more than double the rate of institutions in the 50 states and DC (77% vs. 32%) and are more affordable for low-income students by several thousand dollars per year.

These findings show an opportunity to highlight economic mobility measures for higher education institutions in Puerto Rico and to include these well-performing institutions in national conversations regarding enabling students to achieve economic success.

Contextualizing higher education in Puerto Rico

Puerto Rican institutions are a catalyst for economic mobility. In particular, some of the highest earning premiums for low-income students, highest percentages of Pell students enrolled, and lowest annual net prices for low-income students are at institutions in Puerto Rico. Their high performance is among the many reasons why institutions in Puerto Rico must be included in conversations about economic mobility in higher education in the US. In addition, the vast majority of students in Puerto Rico are Latino, a student population that, due to equity gaps, can especially benefit from the economic mobility provided by attending college or university.

Economic mobility as an assessment tool has gained increased attention across policy discussions in the last few years. Generally, economic mobility measures how an individual’s economic status has improved over time. Using economic mobility as a metric to evaluate or rank institutions diverges from traditional ranking metrics that emphasize selectivity. Instead, economic mobility uses an equity lens to assess how well institutions serve their low-income students. The U.S. News and World Report, Washington Monthly, and Third Way have recently included social and economic mobility indicators to rank colleges and universities in the US mainland. To complement these efforts, Excelencia utilized similar economic mobility indicators to understand the role Puerto Rican institutions have in improving the economic well-being of their students.

While Puerto Rico is only larger than two states in terms of size (Delaware and Rhode Island), it has more colleges and universities than 35 states. Puerto Rico is home to over 80 institutions of higher education where the majority of colleges and universities are four-year institutions, as the two-year sector in Puerto Rico is small. There are only 11 two-year institutions on the island, three of which are public two-years. In contrast, there are 1,216 two-year institutions (859 public) across the 50 states, representing one-third of all mainland postsecondary institutions.

The majority of students enrolled in Puerto Rican institutions are Pell Grant recipients compared to mainland institutions (82% compared to 40%). For further context, in Puerto Rico, approximately 40% of the population is considered to live below poverty and the median household income in Puerto Rico was $20,474 in 2019. This is about a third (35%) of the median household income for Latino students’ families on the mainland ($58,923).

Why include Puerto Rico?

Puerto Rican institutions are an important group within higher education in the US for many reasons. Among these reasons:

• Puerto Ricans are US citizens, the same as people born in any state.
• Institutions in Puerto Rico are US institutions, and as such, they receive federal aid.
• Puerto Rico has more institutions than 35 states including Wisconsin, Maryland, and Indiana. There are more undergraduate degree/certificate-seeking students studying at institutions in Puerto Rico than there are in states such as Arkansas, Nebraska, New Mexico, and others. Including Puerto Rico in discussions on higher education in the US is important to accurately represent the Latino student profile and institutions that serve them.
• Institutions in Puerto Rico perform well on common indicators of economic mobility. Institutions in Puerto Rico:
  – Have larger relative earnings premiums for low-income students.
  – Enroll larger percentages of undergraduate students who were awarded Pell Grants (a commonly used proxy for low-income backgrounds).
  – Are more affordable for low-income students.
• The challenges that have been weathered by institutions in Puerto Rico are reflective of similar challenges for the mainland, including natural disasters, drops in enrollment, demographic shifts, and decreases in public funding.
• Puerto Rico has some of the highest concentrations of Latino students, and all public and private not-for-profit institutions on the island (68) are Hispanic-Serving Institutions (HSIs). [1]

How we measure economic mobility

There are three measures that are often discussed with economic mobility:

• Earnings premiums (difference in earnings between college students and high school graduates) for low-income students,
• Population of Pell students an institution enrolls, and,
• Net annual price for low-income students.

Excelencia analyzed these common measures for economic mobility among institutions in Puerto Rico and compared them with institutions in the 50 states and the District of Columbia. In Puerto Rico, the large numbers of low-income students who enroll in a postsecondary institution are able to earn much higher incomes than otherwise and with a relatively affordable investment. Institutions in Puerto Rico on average:

1. have larger relative earnings premiums for low-income students,
2. enroll more Pell students, and,
3. are more affordable for low-income students.

Institutions in Puerto Rico perform well on key economic mobility indicators. Compared to institutions on the mainland, institutions in Puerto Rico …

1. … Provide a larger relative increase in earnings for low-income students

Low-income students entering a college or university in Puerto Rico are able to earn substantially more than their peers who haven’t attended college or university. The earnings premium for an institution is calculated as the difference between the median earnings of a low-income student 10 years after entry and the median earnings of high school graduates (including equivalency) between the ages of 25 and 34 in the same location.

In Puerto Rico, the earnings premium for low-income students is a 67% increase, much higher than the 43% increase among institutions in the 50 states and DC. There are also 11 institutions in Puerto Rico (out of 68 total in the analysis) where low-income students earn at least double or more ten years after entering college than what they might have earned if they hadn’t enrolled at a postsecondary institution.

Drilling down even further, Puerto Rico has a higher median relative earnings premium than many states that are well-known for their colleges and universities, economic opportunities, and Latino student populations — including California, Texas, and Florida. If locations in the US were ranked by the median relative earnings premiums that low-income students gain from their higher education institutions, Puerto Rico would be ranked in 6th place.

Institutions in Puerto Rico are a valuable resource and path for students and families, offering a better return on investment (ROI) for low-income students than they could achieve almost anywhere else in the nation.

2. … Enroll a much larger percentage of low-income students

Another common component of economic mobility influenced by higher education is enrollment of low-income students. Institutions that enroll more low-income students can provide a path to prosperity for those students and their families. The percentage of undergraduate students awarded a Pell Grant — a measure often used as a proxy for low-income background — at institutions in Puerto Rico is more than double the percentage at institutions in the 50 states and DC. Institutions with large concentrations of low-income students require more resources to effectively support them to graduation. Although institutions in Puerto Rico do well on economic mobility with the resources they have, one way to improve institutional capacity to serve students is to prioritize and significantly increase financial support to institutions serving high numbers of students with financial need.

3. … Are more affordable for low-income students

Institutions in Puerto Rico are more affordable to low-income students on average than institutions in the 50 states and DC in every sector. The overall median annual net price to attend for low-income students is $10,853 for institutions in the 50 states and DC across all sectors, while it is $7,097 for institutions in Puerto Rico. This helps to increase the ROI for students, especially since their smaller initial investments lead to larger earnings premiums.

The bottom line

Institutions in Puerto Rico perform well on measures of economic mobility when compared to institutions in the 50 states and DC, helping low-income students — and Latino students — to earn higher incomes with an affordable education. Puerto Rican institutions provide larger earnings premiums to low-income students, enroll a larger percentage of Pell students, and have lower annual net prices for low-income students. It is therefore essential to include institutions in Puerto Rico in conversations about higher education in the US and economic mobility.

Data sources

To explore the data yourself, click here to see our interactive visualization. The dashboard displays:

1. Aggregate comparisons between Puerto Rico and the 50 states and DC
2. A map of Puerto Rico to explore individual institutions on the island
3. A sortable list of individual institutions in Puerto Rico

Informed by Third Way’s Economic Mobility Index (EMI), we used similar indicators to measure economic mobility. We used three data sources:

• College Scorecard
• IPEDS
• Census 5-year PUMS (Public Use Microdata Sample), 2016–2020

We used the IPEDS 2020–21 Institutional Characteristics and Fall Enrollment files to target the following set of institutions:

• Public or Private not-for-profit
• Degree-granting
• Title IV-participating (receive federal aid)
• Located in Puerto Rico, one of the 50 states, or the District of Columbia
• At least 1 undergraduate student enrolled for Fall 2020

The Earnings Premium for low-income students was calculated using College Scorecard data and Census PUMS files. The College Scorecard dataset contains the median earnings of students working and not enrolled 10 years after entering college, in 2020 inflation-adjusted dollars, in the lowest income tercile $0-$30,000, for each institution. From the Census PUMS files, the median person earnings for high school graduates (or GED/equivalency) between the ages of 25 and 34, adjusted to 2020 dollars, can be calculated for Puerto Rico, each of the 50 states, and the District of Columbia. The Earnings Premium is then calculated as the median earnings of low-income students 10 years after entry minus the median earnings of a high school graduate ages 25 to 34 in the same location.

The percentage of undergraduate students awarded Pell Grants is provided for each institution in the College Scorecard dataset. In order to accurately aggregate the percentage of Pell students for multiple institutions — such as all institutions in Puerto Rico or another location — the IPEDS Student Financial Aid file was used. IPEDS provides the number of undergraduate students awarded Pell grants, as well as the total number of undergraduates in the financial aid cohort for each institution. These numbers were also validated with the College Scorecard’s values for each institution.

The College Scorecard also provides the net annual price for low-income students ($0-$30,000 family income), for public and private not-for-profit institutions. It is calculated from the average annual total cost of attendance minus the average grant/scholarship aid, for all full-time, first-time, degree/certificate-seeking undergraduates who receive Title IV aid.

[1] HSIs are defined in federal legislation as accredited, degree-granting public or private nonprofit institutions of higher education with 25% or more total undergraduate Hispanic full-time equivalent (FTE) student enrollment. Summary of Title V of the Higher Education Act, as amended in 2008.