College Dropouts Cost Taxpayers Billions, Report Says

October 11, 2010

State and federal governments spent an estimated $9-billion between 2003 and 2008 on students who dropped out of college during their freshman year, according to a report scheduled for release on Monday.

While that sum may be a small portion of the overall amount that governments spent on higher education during that time, it's still a high cost for failing to keep students in college, said Mark S. Schneider, vice president for education, human development, and the work force at the American Institutes for Research, which compiled the data for the report.

And since the report considered only first-time, full-time freshmen at four-year colleges, the $9-billion total is also just a portion of the overall cost of dropouts, Mr. Schneider said on Thursday during a conference call with reporters.

Because the report is based on data from the U.S. Education Department, it does not take account of students who attend part time, who leave college in order to transfer to another institution, or who drop out but return later to receive their degrees. So the report's conclusions are incomplete.

The report makes no recommendations about how to better retain college students, but Mr. Schneider said that states should base a much larger percentage of their higher-education spending on the number of students who complete degrees, not the number enrolled, at a given institution.

In addition to the report, the institute is unveiling a new Web site that allows users to compare a variety of performance measures for more than 1,500 public and private colleges and universities and all 50 states, including the percentage of freshmen who drop out of college, the amount spent on those who drop out, and the amount spent on instruction and administration.

The Web site also wades into the controversial area of "gainful employment" by providing some data on the ratio of student-loan repayments to earnings for recent graduates at each of the 1,500 institutions. The U.S. Department of Education is formulating a new regulation that could disqualify some institutions, in particular for-profit colleges, from receiving federal financial aid if their students incur too much student-loan debt in comparison to their earnings.

The Web site is meant to provide accountability and openness for consumers and policy makers about how well a state or a particular institution is performing, said Larry Giammo, managing director of Matrix Knowledge Group, an international consulting company that works with nonprofit and government groups and that helped to create the new site.