For the last 25 years, research on the effects of community colleges on baccalaureate degree attainment has concluded that community colleges drastically reduce the likelihood of attaining a bachelor's degree compared to the effects of four-year institutions on this likelihood. The thesis of this dissertation is that community colleges have been misjudged as institutions that tend to perpetuate social and economic stratification; what previous studies on the topic have found is based on systematic differences in the student populations. Community college students are consistently more at risk of failing academically than four-year students. Then, the positive impact that four-year colleges have on their students compared to the impact of two-year colleges is to a great extent due to the fact that four-year students tend to have more resources and means to handle college requirements than two-year students. The main challenges to analyze two- and four-year sector effects relies on identifying community college students who resemble four-year college students and then compare their outcomes. This dissertation expands on previous research that has only looked at the effect of community colleges on students' educational outcomes by including labor market outcomes. The analyses conducted in this study primarily relied on propensity score matching (PSM) and the Heckman two-stage estimation procedures to reduce bias in the analysis by accounting for non-random selection into the treatment. In addition, the analytic samples were disaggregated by gender and ethnicity. To estimate the effects of interest, a nationally representative sample that is longitudinal and panel in nature was used: The National Education Longitudinal Study of 1988 (NELS:88). Results revealed that neither the two- nor the four-year sectors were able to help students with very low probabilities of graduation from a four-year college. A new financial aid approach that bridges merit-based and aid-based perspectives is proposed. Community colleges, by welcoming a greater proportion of first-time, full-time undergraduate students, many of whom are underrepresented in higher education, and by helping their students to perform similarly than four-year college students in the outcomes analyzed, are conceptualized as engines for mobility helping surpass economic and social stratification of opportunities in American society. [The dissertation citations contained here are published with the permission of ProQuest LLC. Further reproduction is prohibited without permission. Copies of dissertations may be obtained by Telephone (800) 1-800-521-0600. Web page: http://www.proquest.com/en-US/products/dissertations/individuals.shtml.]