Report: U.S. College Dropout Rate Resulted In $4.5 Billion In Lost Earnings And Tax Revenues Last Year

Yesterday, the American Institutes for Research released a new report titled “The High Cost of Low Graduation Rates: How Much Does Dropping Out of College Really Cost?” that examined the economic impact of the college dropout rate. The researchers looked at students who started college in fall of 2002, but failed to graduate six years later, and found that the cost to the nation of these dropouts amounted to $4.5 billion in lost earnings and taxes to state and federal governments:

For students who started in fall 2002 as full-time students seeking a bachelor’s degree but failed to graduate six years later, the cost to the nation was

$3.8 billion in lost income;

$566 million in lost federal income taxes; and

$164 million in lost state income taxes.

These estimated losses are for one year and for one class of students. Because the losses for these students accumulate year after year, these estimates understate the overall costs of low college graduation rates.

The report also estimated the lifetime costs of the college dropout rate state by state. In California, for example, “college dropouts are losing nearly $15 billion in earnings over their work lives, costing the federal government more than $3 billion in lost income taxes.” Meanwhile, states such as Texas and New York “are losing more than $13 billion in earnings over their lifetime and more than $2.5 billion in federal taxes.”

It’s estimated that only around half of students who enroll in college actually end up graduating with a bachelor’s degree. There are also racial disparities in the college dropout rate, with 62 percent of white students who start college earning their bachelor’s degrees and only 42 percent of black students doing the same.

The cause of college dropout rates is frequently debated, but students’ academic readiness and the often crushing cost of higher education are frequently cited as likely culprits.