Community College Dropouts Cost Taxpayers Nearly $4 Billion

Washington, D.C. – Nearly $4 billion was spent by federal, state, and local governments over five years on full-time community college students who dropped out after their first year without completing their certificate or degree programs, according to a new analysis released today by the American Institutes for Research (AIR). About a fifth of full-time students who enroll at a community college do not return for a second year.

For the 2008/2009 academic year, the most recent year for which data are available, nearly $1 billion of taxpayer money was spent on first-year, full-time students who dropped out, about 35 percent more than five years earlier.

A copy of the full report – The Hidden Costs of Community Colleges – including state-by-state figures, is available on the AIR website,, and on the website. The report was funded by the Bill & Melinda Gates Foundation. An interactive map of the state results and a breakdown of the financial implications of dropouts at each community college campus are also available at, a joint endeavor by AIR and Matrix Knowledge Group to help improve outcomes and performance among higher education institutions.

Community college enrollment is growing rapidly, and policymakers are calling on these institutions to play an even greater role in the nation’s higher education system. More than six million students attended community colleges last year, 25 percent more than a decade ago, and President Obama has called for five million more community college graduates by 2020. As community colleges are increasingly relied upon to play a key role in increasing the number of Americans who have a postsecondary education, and retraining jobless workers, more federal and foundation dollars are flowing to these institutions and their students.

Analyzing the five academic years from 2004/2005-2008/2009, the AIR study found that the amounts spent on first-time, full-time students who didn’t return for a second year included: 

  • Almost $3 billion appropriated by state and local governments. 
  • More than $240 million on state grants to students. 
  • About $660 million in federal student grants. 
  • A total of $3.85 billion in federal, state, and local appropriations and grants.

“Taxpayers are investing billions of dollars to support students who never complete their first year,” said Mark Schneider, a vice president at AIR who authored the report. “And these students are paying tuition, borrowing money, and taking time away from work to pursue certificates or degrees they aren’t getting.”

“We must pay far more attention to the high costs of low retention rates,” Schneider said. “The hidden cost of community colleges is rising,” he said, noting that community college enrollments have grown, while completion rates have fallen.

Using U.S. Department of Education data, AIR analyzed full-time students who didn’t return for a second year, while adjusting figures to account for students who transferred to four-year institutions. The cost of dropouts would be higher if part-time students and other government funding, such as direct federal support and capital expenditures, were included in the analysis.

With states and localities spending far more than the federal government on community colleges, and nearly every state facing serious budget shortfalls, the cost of community college dropouts to state taxpayers is especially troubling.

The annual amount state and local governments appropriated for full-time college students who dropped out before the second year grew by almost a third during the five-year period analyzed by AIR, rising from more than $500 million in 2004/05 to more than $650 million in 2008/09. Eight states spent more than $25 million in 2008/09 in grants and appropriations on the dropouts. California spent the most, more than $100 million, while Texas and New York each spent more than $40 million that year alone.

Federal grants that go directly to needy students have risen in recent years. Over five years, more than $650 million of this federal student aid, primarily Pell Grants, went to first-year community college dropouts, $64 million to California students alone.

“Given the central role community colleges play in the nation’s plans to regain its position as the number one country in the world when it comes to college-educated adults, and given the increasing fiscal difficulties facing individual states and the nation as a whole, it is clear that ‘business as usual’ is far too expensive,” the AIR report said. “We need to find better ways of ensuring that students who enter a community college expecting to earn a degree or a certificate finish the first lap and ultimately get across the finish line.”

The postsecondary dropout problem isn’t confined to community colleges. In August, AIR released another report showing how one year of bachelor-degree seeking students who didn’t graduate within six years cost $4.5 billion in lost income and federal and state income taxes.

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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