College Dropouts Cost Cash-Strapped States Billions

Washington, D.C. – During a five-year period, more than $9 billion was spent by state and federal governments to support students at four-year colleges and universities who left school before their sophomore year, according to an analysis by the American Institutes for Research (AIR). California, Texas and New York led the nation in government spending on students who dropped out before their second year.

“Every fall, first-year college students receive significant funding from colleges, states and the federal government. And every spring, hundreds of thousands of students decide not to return to college. When students enroll in a college or university and drop out before the second year, they have invested time and money only to see their hopes and dreams of a college degree dashed,” said Dr. Mark. Schneider, an AIR vice president and the former commissioner of the federal National Center for Education Statistics. “These costs can be heartbreaking for students and their families, but the financial costs to states are enormous.”

In Finishing the First Lap: The Cost of First Year Student Attrition in America’s Four Year Colleges and Universities, AIR researchers analyzed 2003-2008 data from the federal Integrated Postsecondary Education Data System (IPEDS) and found that the 30 percent of first-year college students who failed to return to campus for a second year accounted for $6.2 billion in state appropriations for colleges and universities and more than $1.4 billion in student grants from the states. Additionally, the federal government provided $1.5 billion in grants to these students. The study did not examine community colleges, where first-year dropout rates are even higher.

The findings come at a time when states are struggling to find money for all kinds of programs and services, and when President Obama and the country’s leaders are pursuing a “college completion agenda” and are seeking to have the highest percentage of college graduates in the world by 2020. The report notes, “The nation will have a difficult time reaching the Administration’s policy goals if we continue to spend so much money on students who don’t even finish the first lap, let alone fail to cross the finish line.”

Most students attend public colleges or universities which are subsidized by taxpayers through state appropriations and grants to students. Nationwide, these subsidies average nearly $10,000 per student per year.

With high dropout rates, come high losses in state monies: Thirteen states posted more than $200 million of state funds lost to students dropping out before the second year of college. The states include California ($467 million), Texas ($441 million), New York ($403 million), Illinois ($290 million), North Carolina ($285 million), Ohio ($277 million), Florida ($275 million), Indiana ($268 million), Michigan ($239 million), Georgia ($237 million); Louisiana ($213 million), Tennessee ($205 million) and Kentucky ($201 million). The average state spent $120.5 million in state subsidies to first-year drop-outs between 2003 and 2008.

“As state colleges and universities struggle in a difficult budget environment, what is most disturbing is how much direct state support has been lost to college drop-outs,” Schneider said.

The study did not look at the costs to taxpayers of students who drop out sometime after their sophomore year. Nationally, only about 60 percent of students graduate from four-year colleges and universities within six years.

Over the same five-year period, the cost of state appropriations – just for these first year dropouts – increased by 15 percent. And, expenditures on student aid grants increased by 30 percent from the states and 40 percent from the federal government for students who never returned as sophomores.

Finishing the First Lap serves as the foundation for a new interactive website,, which is a joint endeavor by AIR and Matrix Knowledge Group to help improve outcomes and performance among higher education institutions. Graduation rates and expenditure data for all 50 states, six metropolitan areas and more than 1,500 institutions can be found at the site. The website allows users to evaluate the performance of colleges and state systems on a range of measures, including student progression and graduation rates, graduates’ ability to secure gainful employment, the efficiency and productivity of education-related expenditures, the cost of student attrition, and the amount of financial aid going to students who do not graduate.

About AIR
Established in 1946, with headquarters in Washington, D.C., the American Institutes for Research (AIR) is a nonpartisan not-for-profit organization that conducts behavioral and social science research and delivers technical assistance both domestically and internationally in the areas of health, education and workforce productivity. For more information, visit


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