Unfinished College Degree Means Less Money
Ayinde O. Chase

Washington, DC, United States

As incoming college freshman start this next chapter of their lives, more than 40 percent of them will not graduate. According to analysts, college dropouts will cost the United States billions of dollars in lost earnings and therefore millions of dollars in lost tax revenue.

The American Institutes for Research 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.

"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: Taxpayers Lose Millions, 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."

The Obama administration and the nation's governors are encouraging more students to earn college degrees because of the importance to the nation's economic future of having a highly skilled workforce that can compete in the global economy

"Students who start college and don't graduate incur large personal expenses. They have paid tuition, they have taken out loans, they have changed their lives and they have failed in one of the biggest goals they have ever set for themselves," said Schneider.

"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."

According to the U.S. Bureau of the Census, young adults between the ages of 25 and 34 with a college degree earn nearly 40 percent more than someone who has not completed a degree and around two-thirds more than someone with just a high school degree.

Previous research has proven that over the course of a lifetime college graduates earn more than half a million dollars than someone who just completed high school.

Some states are losing substantial sums of revenue because of the large number of dropouts from their colleges and universities. For instance, California suffers with $386 million in lost income, and New York with close to $360 million. Louisiana, Massachusetts, North Carolina and New Jersey have all lost between $100 and $107 million in earnings based on the AIR report.

The loss is seen on the federal level as well.

California, New York and Texas have losses in federal income taxes exceeding $50 million per year. Massachusetts, North Carolina and New Jersey have losses of more than $15 million.

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