College Dropouts Cost America Billions in Lost Earnings, Researchers Report

When students drop out of college, it's not just disappointing for them and their parents -- it's also bad news for Uncle Sam, and even for their next-door neighbors.

A new study from the American Institutes for Research examined the outcomes for more than 1.1 million full-time students who entered college in 2002 with the best intentions of getting a bachelor's degree. AIR says nearly 500,000 did not graduate within six years. The quitting spurt is expensive: AIR says those dropouts cost the nation $4.5 billion in lost income, and lost federal and state income taxes.

At a time when the fed and state governments are hungry for revenues, those losses are felt keenly.

"These findings represent just one year and one graduating class. Therefore, the overall costs of low graduation rates are much higher since these losses accumulate year after year," explained Mark Schneider, a vice president at the nonprofit institution, who co-authored the report, The High Cost of Low Graduation Rates: How Much Does Dropping Out of College Really Cost? with Lu (Michelle) Yin. "This is just the tip of the iceberg. While this report focuses on only one cohort of students, losses of this magnitude are incurred annually by each and every graduating class," he said in a prepared statement.

Students who walk away before they get to strut to Pomp and Circumstance are not only left with the emotional baggage of not completing college, but also with the heavy burden of student loan debt, and the investment of their own money in tuition that won't generate any returns. And of course, by leaving school without a sheepskin, they are curtailing their ability to get the great jobs they desire.

According to the Census Bureau, college graduates between the ages of 25 and 34, working year-round, earn about 40% more than those with some college who have not completed their degrees, and around two-thirds more than those with just high school diplomas. The lifetime earnings of a college graduate can exceed those of a high school graduate by as much as $500,000, reports AIR.

Why Your Neighbors Care If You Drop Out

A large number of students leaving college before graduating is a lose-lose proposition for the entire society.

"Taxpayers have paid billions of dollars in subsidies to support these students as they pursue degrees they will never earn, and as a nation, we incur billions in lost earnings and lost income taxes each year," said Schneider.

The lost revenue and economic energy lost due to dropouts from colleges and universities affects some states significantly more than others, according to AIR.

In 14 states, the income losses from the single group of dropouts examined exceeded $100 million annually, reports AIR. California topped the list with $386 million in lost income, followed closely by New York with around $360 million. Louisiana, Massachusetts, North Carolina and New Jersey all lost between $100 million and $107 million in earnings.

States Losing Money

"Federal income tax losses parallel these numbers: with losses in federal income taxes exceeding $50 million per year in California, New York and Texas and more than $15 million in losses from Massachusetts, North Carolina, and New Jersey," writes the AIR.

The bottom line: With AIR estimating that 40% of this year's incoming college freshmen will fail to earn their degrees within six years, somebody should be studying up on how to boost students' odds of success, and how to restore the U.S. to the glory days when it had the world's highest concentration of college and university degrees.

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