The economics of low college graduation rates

Looking at the potential income that states lose.  Instead of looking at the dropout's personal lost income, this report looks at what the states are losing, particularly those with a state income tax.  For Tennessee, since we lack a state income tax, the loss is a modest $4.1 million. For a state like New York, the loss is $24 million. From the American Institutes for Research.

The High Cost of Low Graduation Rates
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 through at


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