We compare the effectiveness of a first implementation of peer instruction (PI) in a two-year college with the first PI implementation at a top-tier four-year research institution. We show how effective PI is for students with less background knowledge and what the impact of PI methodology is on student attrition in the course. Results concerning the effectiveness of PI in the college setting replicate earlier findings: PI-taught students demonstrate better conceptual learning and similar problem-solving abilities than traditionally taught students. However, not previously reported are the following two findings: First, although students with more background knowledge benefit most from either type of instruction, PI students with less background knowledge gain as much as students with more background knowledge in traditional instruction. Second, PI methodology is found to decrease student attrition in introductory physics courses at both four-year and two-year institutions.