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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The world needs truck drivers and ditch diggers too? There is a big difference between potential income and lost income?

August 24 2011 at 9:23 AM Report abuse rate up rate down Reply


August 23 2011 at 5:59 PM Report abuse rate up rate down Reply

The biggest storm on the horizon is student loan default. all the students who have taken out loans in past few years and those grads who can not find a job........the wave of student default is but a few short years away. these folks like mortage holders will just walk away. joe tax payer will again be left holding the tab i know personally 2 mid 20 yr olds that have no hope of every paying their debts could they...they have no income now

August 23 2011 at 3:23 PM Report abuse rate up rate down Reply

Th article is stupid, lacks any kind of research, based on nothing, must be written by one of those Dream people we pay for

August 23 2011 at 2:11 PM Report abuse -1 rate up rate down Reply

They must mean the money that the college loses? the local bars? restaurants? The government will just bail out the banks again and raise our taxes. I read that they have a resort all set for Momar Kadafi when he leaves and Social Secirity all set for him.

August 23 2011 at 2:09 PM Report abuse -1 rate up rate down Reply

The article doesn't mention how many of the freshmen should never have been in college in the first place due to lack of competence, immaturity, and pressure from the parents. These students make room for more professor slots and remedial classes. It is too bad we all have to pay for this merry-go-round. Student loans should be made on a semister basis, one semester behind. That allows time for weeding out duds and makes more money available for the students that need it. It makes everyone pay in advance for the chance to be admitted. Can't afford it, go find a job and save the money to afford it.

August 23 2011 at 2:07 PM Report abuse -1 rate up rate down Reply

This article is whats wrong with this country.. Brain dead people.... Really!!

August 23 2011 at 11:52 AM Report abuse -1 rate up rate down Reply

Do you know what costs us billions? Politicians, banks, wars, Wall Street, corporations keeping there money overseas, tax loop holes for the wealthy, tax cheats and the list goes on and on.

August 23 2011 at 10:42 AM Report abuse +1 rate up rate down Reply

This is an absurd notion!!! Who writes this stuff and gets away with having it published. There is not even one modicum of intelligence in this lie!!

August 23 2011 at 9:47 AM Report abuse -1 rate up rate down Reply
1 reply to jcy5030's comment

who wroTe this ? why another college grad !

August 23 2011 at 10:06 AM Report abuse -1 rate up rate down Reply

These college loans that these people default on do not go away, the government will take every tax return, rebate and garnish their pay until the loan is paid off . these loans may start off around $30,000 but as soon as they default it will grow to over $45,000 the first year and then they will get hit with a civil lawsuite which will increase balance to $80,000 they will take part of youur social security if you make it that far,they state you no longer have rights to any program that they offer to helpyou they consider you the lowest form of life in the us foreign crimicals have more rights and are treated better then those who default on college loan and have no job

August 23 2011 at 8:38 AM Report abuse rate up rate down Reply
1 reply to pole's comment

""they"" have to regulate WHERE these loans are going and stop giving loans to these bs trade schools that recruit and enroll unqualified students---the schools will get X,Y and Z in government funding and tuitions guaranteed for at least one quarter and the former students have these loans that they remain totally ignorant and clueless on repayment.

August 23 2011 at 10:14 AM Report abuse rate up rate down Reply