College Dropouts Cost Taxpayers $9 Billion


College students who drop out before their sophomore year have cost taxpayers more than $9 billion during the past five years, according to a study by the American Institutes for Research (AIR).

The funds represent money spent on these students through state and federal financial aid packages used to pay for their freshman year.

In order to figure out how much money in state and federal subsidies was lost, AIR researchers analyzed five years of data from 2003 to 2008 from the federal Integrated Postsecondary Education Data System (IPEDS).  

The AIR found that 30% of first-year college students who did not enroll for their second year accounted for $6.2 billion in state appropriations to these colleges and universities and more than $1.4 billion in student grants from the states. Additionally, the federal government provided $1.5 billion in grants to these students before they elected to drop out of school. These subsidies average nearly $10,000 per student per year.

“Every fall, first-year college students receive significant funding from colleges, states and the federal government. And every spring, hundreds of thousands of students decide not to return to college,” Mark Schneider, an AIR vice president, said in a press release. “These costs can be heartbreaking for students and their families, but the financial costs to states are enormous.”

According to a 2002 report by the Census Bureau, high school graduates can expect to earn an average of $1.2 million in their lifetime while those with a bachelor's degree earn $2.1 million. Those who drop out of school during their second year fail to earn their degree, which puts them in a lower income bracket than those who do successfully complete college.

AIR also pointed out that overall losses due to students leaving college early may actually be much higher, since this particular study did not examine community colleges, where first-year dropout rates are traditionally greater. It also does not account for students who drop out after their sophomore year. According to AIR, only about 60% of students graduate from nationwide four-year colleges and universities within six years.

On average, states spent $120.5 million in subsidies to first-year dropouts between 2003 and 2008.

California, Texas and New York top the list of states most affected by students discontinuing their higher education, losing $467 million, $441 million and $403 million in state funding respectively.  

Other states losing more than $200 million in subsidies include Illinois ($290 million), North Carolina ($285 million), Ohio ($277 million), Florida ($275 million), Indiana ($268 million), Michigan ($239 million), Georgia ($237 million), Louisiana ($213 million), Tennessee ($205 million) and Kentucky ($201 million).

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at

Show Comments

Back to Top