Executive Summary

President Obama has set an ambitious goal for the nation: By the year 2020, the United States will have the highest proportion of adults with college degrees in the world. The Obama administration sees the successful completion of postsecondary education as essential to American competitiveness. Governors likewise see the economic future of their states as dependent on the development of a highly educated workforce that can compete with other states and other nations.

There also are more immediate reasons for elected officials to want more college graduates. College graduates earn, on average, far more than college dropouts, and these higher earnings translate directly into higher income tax payments that can help solve growing fiscal problems at the federal and state levels. But our colleges and universities are now graduating only slightly more than half the students who walk through their doors. Much of the cost of dropping out is borne by individual students, who may have accumulated large debts in their unsuccessful pursuit of a degree and who forfeit the higher earnings that accrue with a bachelor’s degree. This report shows the high costs of low college graduation rates in terms of lost income and in lower tax receipts for federal and state 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 approximately 

• $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. Further, this report focuses on only one cohort of students; however, losses of this magnitude are incurred by each and every college class. In short, there are high costs for low graduation rates borne by individual students, by their families, and by taxpayers in each state and the nation as a whole. Detailed state data and tools to compare income and tax losses across states are available at College Measures.