NEW YORK, July 18, 2013 — Completing an associate degree at a community college before transferring to a four-year college, as opposed to transferring without a two-year degree, has economic benefits for both students and states, a new study from the Community College Research Center (CCRC) at Teachers College, Columbia University has found.

The study, which examined students in one state system between 2001 and 2010, compares the 20-year net benefits (defined as students’ earnings minus the total cost of their education) for students who transfer to any four-year college after completing an associate degree with those for students who transferred before earning a community college credential. Many students who transfer drop out before earning a bachelor’s degree; thus, students who do not their associate degree first may exit college without any credential at all.

These students never realize the earnings increase conferred by a degree. The study addresses a question commonly asked by students, policymakers, and college administrators: When is the best time to transfer? Some previous studies have concluded that students are more likely to complete when they start at four-year colleges, so starting at community colleges “diverts” students from attaining a bachelor’s degree.

This “diversion” theory suggests that it might be better for community college students to transfer to four-year colleges as soon as possible. However, this conjecture does not take into account the fact that attending community college is less expensive than attending a four-year college and that many transfer students do not go on to obtain bachelor’s degrees. Virtually all prior research into the value of two-year versus four-year degrees omits consideration of these two variables.

CCRC’s analysis finds that while transfer students who go on to earn a bachelor’s degree without an associate degree earn slightly more over 20 years than those who complete an associate degree before transferring ($803,000 vs. $764,400), the higher costs associated with early transfer result in slightly lower net benefits. When the likelihood of dropping out without earning a bachelor’s degree is also taken into account, students who complete an associate degree before transfer see a net-benefit advantage of $50,000 over twenty years.

According to the analysis, early transfer would only be more valuable to students—and more cost-effective for states—if 90% of early transfer students completed a bachelor’s degree. In reality, less than half that percentage do so.