The High Cost of Low Graduation Rates

M. Schneider
L. Yin


President Obama has set an ambitious goal for the nation: By the year 2020, the United States will have the highest proportion of adults with college degrees in the world. The Obama administration sees the successful completion of postsecondary education as essential to American competitiveness. Governors likewise see the economic future of their states as dependent on the development of a highly educated workforce that can compete with other states and other nations. There also are more immediate reasons for elected officials to want more college graduates. College graduates earn, on average, far more than college dropouts, and these higher earnings translate directly into higher income tax payments that can help solve growing fiscal problems at the federal and state levels. But colleges and universities are now graduating only slightly more than half the students who walk through their doors. Much of the cost of dropping out is borne by individual students, who may have accumulated large debts in their unsuccessful pursuit of a degree and who forfeit the higher earnings that accrue with a bachelor's degree. This report shows the high costs of low college graduation rates in terms of lost income and in lower tax receipts for federal and state governments.



The Obama administration, seeking to improve American global economic competitiveness, set a goal to increase the number of college graduates. By 2020, Obama challenged Americans and universities to have the highest global proportion of higher education graduates. On the state level, governors see more localized economic benefits to a more highly educated populous, noting state-to-state and global workforce competition.

However, despite the encouragement of state and federal officials, colleges and universities are graduating roughly half of the students to begin their studies. This study looks to the economic losses that result in students not completing their college education. Losses include billions in individual income, resulting in millions in lost yearly federal and state income taxes. Further, students who begin college but do not complete it, are often saddled with thousands of dollars in loans. Paying off these loans without the economic boost that a college degree affords causes further economic stagnation.

APA Citation

Schneider, M., & Yin, L. (2011). The high cost of low graduation rates: How much does dropping out of college really cost? American Institutes for Research.

About the Study

Links to Article
Publication Type Report
In Publication American Institutes for Research
Type of Research Quantitative
Research Design Survey research (qualitative or quantitative)
Intervention/Areas of Study Other
Level of Analysis Student-level
Specific Populations Examined
Peer-Reviewed No
Specific Institutional Characteristics of Interest
Specific Course or Program Characteristics
Outcome Variables of Interest Other
Student Sample Size
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