Billions Of Taxpayer Dollars Go To Universities With Massive Dropout Rates Every Year (Updated)


Thanks to the lack of accountability in higher education funding, taxpayers are sending billions of dollars each year to “dropout factories” where fewer than one in seven students graduate within six years, according to a new report.

The Education Trust’s report labels schools as college “dropout factories” if they fall into the bottom 5 percent of higher education institutions with regard to six-year completion rates. More than $4 billion in federal money goes to those schools every year, but the problems go deeper than graduation rates. The report finds that almost 600,000 students are attending “failing schools,” a category that includes “dropout factories” and other types of dysfunction. These troubling school groups combined account for almost $15 billion in federal loan, work-study, and grant money. That amounts to about 8 percent of annual federal spending on higher education.

The report also notes a baffling contrast between how little the government does to police institutions that get federal higher education money and how it micromanages the K-12 education system. Where primary and secondary schools “have had to set improvement goals for every major demographic group of students they serve” and are held financially and administratively accountable to those goals, higher education institutions can keep getting taxpayer money every year “regardless of outcomes.”

To close the accountability gap between the two categories of educational institutions, The Education Trust suggests adopting the same sort of bare minimum standards for higher education performance that the government has for primary and secondary schools. Just as a K-12 school that consistently falls into the bottom 5 percent on federal measures of student achievement will be targeted for government intervention, the group suggests, any college or university that can’t beat the worst-performing twentieth of schools should be held accountable. That 5 percent threshold is a guiding principle for the group’s policy recommendations, which range from a crackdown on “dropout factories” to a new set of incentives for campus economic diversity and graduates’ success at finding work.

If the report’s recommendations were implemented, schools labeled “dropout factories” would have four years to raise their 6-year graduation rate over 15 percent. Schools in the bottom 5 percent of economic diversity, meaning that fewer than 17 percent of freshmen were low-income students eligible for Pell grants, would have three years to improve. Schools in the bottom 5 percent on graduate loan repayment rates would also have a three-year window to shape up. Chronic failure to meet the new standards could eventually freeze a school out of the federal aid system, which is effectively a death sentence for a college.

In order to install a 5 percent threshold rule for graduate economic success, however, the Department of Education must first begin collecting data on graduate loan repayment rates by institution so that schools can be compared and “diploma mills” can be weeded out. The government currently monitors only the rate of graduate defaults, which the report points out “represents the final stage of financial distress.” The current system means that a student who avoids default by making bare minimum payments that will never actually reduce her loan balance — hardly a success story — is still counted as evidence that a school is fulfilling its obligations to graduates. In order to get a clearer picture of graduate success, the group proposes gathering data on the percentage of graduates who are able to reduce their student loan balance each year rather.

The group’s proposals come as student loan default rates stand at record highs and outstanding loan balances total more than a trillion dollars. Despite that historic level of failure in the higher education financing system, however, some lawmakers are fighting to protect for-profit colleges that tend to perform worst on the sorts of student achievement accountability measures that The Education Trust wants to impose.


This post has been updated to more accurately reflect the relationship The Education Trust reports between the total amount of money that goes to “failing schools” and the various types of institutional failure the report identified.