Sunday, July 01, 2012

Is a College Education Worth The Cost? Part 2: The High Cost of College Dropouts

A previous post showed that merely getting a college degree doesn’t always result in better job prospects or earnings. But the value of pursuing a college education also depends on how much college costs and how likely you are to graduate.

The Pittsburgh Region is lucky to have some of the best universities in the nation, but they also have fairly high tuition. U.S. Department of Education statistics show that in 2010-11, the University of Pittsburgh had the second highest tuition and fees for in-state students of any four-year public university in the country (Penn State was the highest), and Carnegie Mellon University had the 10th highest tuition and fees among four-year private, non-profit colleges in the nation.

The most expensive college education of all, however, is the one that never results in a degree. A shocking fact about higher education in America is that on average, over 40% of the students who go to a four-year college or university don’t graduate (at least not from the school where they started). The most selective colleges generally have the highest graduation rates, whereas the colleges that are easiest to get into generally turn out to be the hardest to finish, at least for the students who go to them. U.S. Department of Education data show that among the students who started college in 2004, the graduation rate was 87% for those who went to the most selective colleges (i.e., colleges that admitted fewer than 25% of those who applied), but the graduation rate was only 45% for those who went to the least selective colleges (those that admitted 90% or more of their applicants), and only 29% for those who went to open enrollment schools (those that admit anyone who can pay).

In the Pittsburgh Region, the highest graduation rate is at Carnegie Mellon, where 86% of students who were admitted graduated within 6 years. The second highest graduation rate is at Grove City College, where 84% of students graduate, and Pitt’s 76% graduation rate is third highest. In contrast, most other colleges in our region graduate fewer than two-thirds of the students who enter, and at some, fewer than 50% of the students graduate within 6 or even 8 years, including The Art Institute, the Penn State regional campuses, Point Park University, Thiel College, and the University of Phoenix. (Graduation rates are based on the percentage of students who graduated from the same school where they started, and so some students may transfer to other colleges and graduate from there.)

These differences are so large that it’s actually misleading to simply rank colleges based on their tuitions. A more expensive college can actually be a better value if it has a higher graduation rate, because students who enroll there will be more likely to receive a degree.

Consider two hypothetical colleges. College A charges $30,000 per year in tuition, while College B charges only $20,000. 80% of College A’s students graduate, but only 40% of College B’s students graduate. For simplicity, let’s assume that those who don’t graduate drop out after two years.

If College A admits 1,000 students, 800 of them will graduate, and the college will have collected a total of $108 million in tuition revenue over the previous four years: $96 million from those who graduated, and $12 million from those who didn’t. That works out to $135,000 for every degree awarded. If College B admits 1,000 students, only 400 of them will graduate; the college will have collected a total of $32 million in tuition revenue from those who graduated but another $24 million from those who didn’t, for a total of $56 million, or $140,000 for every degree awarded. In other words, even though College A’s tuition makes it look like it’s 50% more expensive than College B, College A actually produces college graduates at a lower cost than College B.

Even worse, college students who don’t graduate will very likely have thousands or even tens of thousands of dollars in debt with no degree to show for it. Although national statistics indicate that people with “some college” do better in the labor market than those with no college at all, it’s likely that much of this is because the students who made it into college in the first place have higher skills than the average high school graduate. Those students might have been better off going to a two-year college, getting an Associate Degree, and avoiding a lot of debt, or going directly into a manufacturing job, developing skills through on-the-job training, and saving money to go to college in the future.

Low graduation rates aren’t entirely the fault of the colleges, though. They’re also due to the poor preparation of the students who enter them. U.S. Department of Education data show that about one-third of students entering post-secondary education have to take at least one remedial course. Moreover, remedial education has become a significant and growing expense at many colleges and universities, and that increases the cost of a college degree for everyone.

So if we want to increase the value of higher education, we should start by improving the effectiveness of elementary and secondary education, i.e., our public schools. Although many high schools proudly report the percentage of their graduates who go on to college, they rarely tell you how many of those students actually finish their college degrees. The best measure of the quality of public schools is how proficient their graduates are in key skills, not whether they go to college, since high proficiency levels will help students whether they want to go to college or go directly into the workforce. And schools in the Pittsburgh Region have a lot of improving to do, since more than 37 percent of the 11th-graders in the region can't do math properly, and 26 percent can't read adequately.

A future post will look at what else makes college education so expensive and what can be done about it.

(A version of this post appeared as the Regional Insights column in the Sunday, July 1, 2012 edtition of the Pittsburgh Post-Gazette.)


Anonymous said...

I think education it self means progressing in life, so I believe that if a college education is what can be afford, we should take the best of it.

8:22 AM  
Blogger OIK2 said...

Interesting article, but I feel that the conclusions are drawn from the wrong side of the equation. When you see these graduation rate vs acceptance rate statistics, you assign the cause to the university, but I would assign the cause to the students that they accept. The most hardy of students will have a better chance of qualifying for the more selective school, and then stick to it. The less selective schools will have a greater percent of students that really do not belong in a university setting, and throughout their education they will realize this when they hit the limit of their competency, and drop out. People accepted into an open enrollment school are not putting themselves in a position to compete with others for acceptance, or were unable to make the cut at more selective schools, and this could indicate their overall ability to graduate.

Ultimately I think the evaluation needs to be taken from the student side, not the university side, because when you choose to go to a school with a lower retention rate your chances of graduation are based on your ability to function to the level that they expect of you, not on a random chance vs their rate. You are not going to have a better chance of graduating from a more selective school, in fact you would probably be able to graduate from any level of these schools if you can graduate from there, but you will probably be carrying a lot more debt.

The problem is not that people are not going to selective enough schools, it is that people that have no place in a university setting are taking on large amounts of debt because they are being told that it is what is expected of them.

TL;DR - When deciding what school to go to, don't choose based on their past retention rates, base it on your ability to do the work it takes to graduate.

7:43 PM  

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