Report – $4.5 Billion in Earnings, Taxes Lost Last Year Due to the High U.S. College Dropout Rate

by Sabrina I. Pacifici on August 22, 2011

News release: “As students across the country prepare to start their freshman year of college, more than 40 percent of them will not graduate within six years – costing billions of dollars in lost earnings for the students and millions of dollars in lost tax revenue, according to a new analysis by the American Institutes for Research (AIR). AIR conducted a study that examined the more than 1.1 million full-time students who entered college in 2002 seeking bachelor degrees. Of that total, almost 500,000 did not graduate within six years – costing a combined $4.5 billion in lost income and lost federal and state income taxes. The AIR analysis found that the 493,000 students who started college in 2002 but did not earn a degree within six years lost a total of approximately $3.8 billion in income in 2010 alone. The lost income would have generated $566 million in federal income tax revenue, while states would have collected more than $164 million in state income taxes. “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 AIR 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.”

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