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The Education Drain: Study Finds That States Are Losing Billions to College Drop-Outs

According to an analysis by the American Institutes for Research, state and federal governments spent over $9 billion in five years on college students who dropped out as freshmen. The report highlights how crucial college completion efforts are, not just for students but for the taxpayers who are funding their student loans.

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The High Cost of College Drop-Outs

Research by non-profit education group ACT indicates that about one-third of students at 4-year colleges and universities drop out as freshmen. Clearly, that's a problem - for all the students and their families who invested time and energy into their education, and for an economy that is increasingly dependent on having a nation of college graduates.

According to the American Institutes for Research (AIR), it's also a problem for struggling state budgets.

Analyzing 2003-2008 data from the federal Integrated Postsecondary Education Data System (IPEDS), researchers from AIR found that $6.2 billion in state appropriations for colleges and universities was spent on students who dropped out as freshmen. The federal government provided an additional $1.4 billion in grant aid to this group.

AIR didn't even examine the amount of money lost to students who dropped out after their sophomore year - nationally, only 60% of students at 4-year institutions graduate with six years. Nor did the study include community colleges, where first-year drop-out rates are even higher. (Although, to be fair, community college students account for less in federal aid spending, even though their need is greater.)

Money Pile

Direct Funding Disappears

These numbers represent major financial losses at the state level. Between 2003 and 2008, states on average spent more than $120 million in subsidies on first-year college drop-outs. Thirteen states reported losing over $200 million in state funds to these students, with California, Texas and New York leading the pack at $467, $441 and $403 million, respectively.

That's an incredible amount of direct state funding going to waste. And at a time when states are struggling to meet their budgets, it's difficult not to see education spending as a significant - and growing - drain.

Over the same 5-year period, AIR researchers found that state tax appropriations for first-year drop-outs increased by 15 percent. And student grant expenditures increased by 30% for states and 40% for the feds - again, only for those students who didn't return as sophomores.

The Obama administration has already been calling for an increase in college completion rates as a way to bolster America's economic future. The AIR report emphasizes the fact that college drop-out rates also pose a financial problem today. Postsecondary institutions and their students need more funding to increase the number of college graduates. But why should taxpayers and cash-poor government agencies provide that funding when so much of it is going to waste?

Reducing the college drop-out rate should be a high priority for every institution. It's time to stop the drain, both intellectually and financially.

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