The High Cost of Dropping Out of College

StraighterLine Reports on The High Cost of Dropping Out of College

By Greg Roth

“I ask every American to commit to at least one year or more of higher education or career training...That is why we will provide the support necessary for you to complete college and meet a new goal: by 2020, America will once again have the highest proportion of college graduates in the world.”1

-President Barack Obama, State of the Union, February 24, 2009

In the world of education, a lot of focus is placed on the high school dropout rate. Nationally, only about 70% of freshman end up graduating from the K-12 system.2 However, less attention has been given over the years to the college and post-secondary dropout rate, even though it is exponentially more alarming. For every 100 kids who enter our high schools as freshman, only 20 of them obtain a bachelor's degree, and that figure is calculated by giving students a full decade after entering to finish.3 This is especially important for the future of the country's economic health, as well as for the prospects of individual citizens, as gaps in future income tell us. In 1972, 38% of “high-income” Americans earned a bachelor's degree by age 24. Now, 82% do.4

That all may change with the release of a new report by the American Institutes of Research, “The High Cost of Low Graduation Rates.” For the first time since President Obama's declaration, analysis has put a dollar figure to the national financial loss incurred by our students and future workforce not attaining suitable levels of education. The numbers in the report are staggering. Based on the incoming Fall 2002 full-time student class, those who sought bachelor’s degrees but failed to graduate within six years later, the nation suffered:

  • $3.8 billion in lost income
  • $566 million in lost federal income taxes
  • $164 million in lost state income taxes5

These figures are one year's losses for one class of students. Because losses can accumulate and because the cycle repeats itself year in and year out, the report believes it is estimating conservatively. While individuals miss out on future earnings, the nation suffers a loss in revenue from future taxpayers as well, thereby affecting the very system which is constructed to help them attain a high-quality education.6

A closer look at higher education dropouts shows that the nation can do a better job of offering its citizens the right education for each student's needs, especially by embracing innovations in higher education like online learning.

The Goals-Reality Mismatch

President Obama is not the first to set such lofty goals, of course. One of the biggest funders and proponents of college completion and attainment, the Lumina Foundation, has called for pushing the proportion of Americans with high-quality degrees and credentials up to 60 percent by the year 2025.7 In order to achieve this however, that means populations that have the lowest rate of college degree holders – low-income students, students of color, first-generation students and adult learners – would need to experience dramatic gains.

For starters, Hispanic student lag behind their white counterparts, as documented in a 2010 report by the American Enterprise Institute (AEI). The AEI report, "Rising to the Challenge: Raising Hispanic Graduation Rates as a National Priority," examines the progress Hispanic students in the education system and finds mixed results. First, 51% of Hispanics students complete a bachelor's degree within six years of starting, compared with 59% for white students. Within the Hispanic group itself, women graduate at consistently higher rates than men and often graduate at the same rate as white men in their schools.8

The numbers for African-American students are much worse. According to data cited in The Journal of Blacks in Higher Education, their college completion rate is well below both their white and Hispanic counterparts, limping in at 43%. Similar to Hispanic students, there is variance within the black population itself: black women have improved their college completion rate from 34 percent in 1990 to 47 percent in 2006. Over that same time period, black men have improved their graduation rate from 28 percent to 36 percent.9

At the state level, New Mexico has experimented with a lottery system in order to get more underserved populations in to the state system of higher education – to mixed results. The way the lottery works, any New Mexico high school graduate can attend a state college or university tuition-free, as long as they graduate high school with a 2.5 grade-point average on a 4.0 scale.10

The state analyzed the lottery scholarship program in 2010 and found that the lottery scholarship did not improve the four-year graduation rate at New Mexico State University and only slightly improved the school's six-year graduation rate. The University of New Mexico received nearly $30 million in lottery money in 2010, despite the fact that only one in seven lottery scholars, or 14%, earned a college degree after four years in school, according to UNM statistics.11

Most graduation rates are calculated by allowing students 150% of standard time to complete their degree, that is, 6 years for a bachelors and 3 years for an associates. But how much of a factor is that seemingly arbitrary measurement?


2 (Direct download)




6 Ibid


8 (Direct download)



11 Ibid