NCPA - National Center for Policy Analysis

Subsidizing Failure

May 21, 2013

There is at least one place with huge potential for ending wasteful higher education spending: to stop subsidizing students who do not graduate and put their education to good use, say Jenna Ashley Robinson and Jay Schalin of the Pope Center for Higher Education.

According to a forthcoming study by Harry Stille, the director of the Higher Education Research/Policy Center in Greenville, South Carolina, the key is admissions policy -- the more qualified the students, the more likely (and sooner) they are to graduate. Stille's data show that the relationship between admissions criteria and graduation rates is extremely strong.

  • The 10 state university systems that have the most difficult admissions criteria were all in the top 20 systems for graduation rates.
  • Conversely, of the 10 state systems with the easiest admissions criteria, only two -- New Hampshire (6) and Rhode Island (15) -- ranked higher than 37th best for graduation rates.

Stille attempts to compute the cost to the state from students dropping out by multiplying the number of students who start but fail to complete college ("non-completers") at a school (or system) by the amount that the state subsidizes students at that school. Arizona State University is the most wasteful, with an annual cost-of-non-completion of roughly $26 million because it is a large school with a low graduation rate. The University of Virginia is at the other extreme, wasting less than a quarter of a million dollars per year due to drop-outs.

Stille indicates that the average amount of time it takes for students to graduate from public institutions is 5.5 years. This is costly. For example, look at East Carolina University's most recent cohort for which extended graduation statistics are available, the 3,792 students starting in the fall of 2006.

  • Of these students, 32.7 percent graduated after four years, and 58.2 percent graduated after six.
  • That means that 25.5 percent of the class (the difference between those who graduated in four and six years, or 967 students) needed at least one extra semester to finish their education.
  • The state of North Carolina appropriates $5,660 per student per semester, so that, in the fall of 2010, taxpayers were charged $5.5 million extra for students who took extra time to graduate, from just one cohort.

Much of that $5.5 million was waste from taking too long to complete school. Multiplied by several cohorts over many semesters, the cost becomes enormous.

Source: Jenna Ashley Robinson and Jay Schalin, "Subsidizing Failure," Pope Center for Higher Education, May 12, 2013.


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