College Dropouts Cost North Carolina Taxpayers $446M Per Year

Students who leave college with no degree but an accumulation of debt face obvious hardship, but what about taxpayer money wasted on students with no degrees?

The results for North Carolina are staggering. Of the 155,982 students who enrolled in one of its 16 public universities last year, 52,184 will not graduate. To Dr. Harry C. Stille, president of the Higher Education Research and Policy Center, this trend indicates potential fraud—committed by public universities that knowingly admit unprepared students.

Stille estimates that in 2014, $446 million in state money was wasted on non-completing students. Accounting for the total educational cost—which includes tuition and fees paid by students and their families—the amount was $672 million.

Stille has detailed these results in a new report on the cost of non-graduating students. His formula uses the six-year graduation rate, combined with figures for state-allocated dollars per student and tuition dollars per student, to estimate how much money is lost when students drop out. To help account for intra-state transfers, Stille added 5 percent to the graduation rate of each institution.

Among North Carolina institutions, UNC-Charlotte is the biggest offender, with an average 7,593 students dropping out each year. UNC-C generates taxpayer waste of $65 million and a total waste of $97 million per year. More than 40 percent of students do not graduate at eight individual UNC schools, generating a taxpayer waste of more than $213 million.

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Among the 17 states included in the Southern Regional Educational Board, only 41.2 percent of universities have more graduates than non-graduates. North Carolina ranks among the highest for total taxpayer waste, but is fourth for lowest non-completion rate. This is due to North Carolina’s high allocation of tax dollars per student. Usually a big investment in students by the state would be celebrated, but when it leads to rampant waste, intent does not equal results.

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To understand the issue on the largest scale possible, Stille’s report provides data for all 529 public institutions in the United States. Combined, the taxpayer waste totals nearly $12 billion nationwide.

As if the levels of state taxpayer waste are not staggering enough, the federal student loan program produces an additional burden. The Congressional Budget Office estimates U.S. taxpayers will bear an additional $170 billion in the next decade due to the high rate of non-repayment.

Andrew Kelly, the UNC system’s new top policy advisor, recently presented a threefold solution to the dilemma to the UNC Board of Governors: Improve academic preparation, inform students about their options, and provide incentives for institutional improvement and cost containment.

Kelly’s recommendation to improve consumer knowledge is vital. Students are often unaware of the true cost of college, the potential wage earnings of their major, and their likelihood of success at a given school. Even more important, students graduate from high school falsely believing they’ve been prepared for college.

According to a report from the National Center for Public Policy and Higher Education, “Even those students who have done everything they were told to do to prepare for college find, often after they arrive, that their new institution has deemed them unprepared. Their high school diploma, college-preparatory curriculum, and high school exit examination scores did not ensure college readiness.”

Fortunately North Carolina has taken steps to improve academic preparation. Innovations in remedial education aim to deliver fundamental skills in math and reading to students in high school, rather than in college. Additional programs like the North Carolina Guaranteed Admissions Program may also prevent waste caused by underprepared students.

But Stille thinks it’s not enough. He recommends that no student be enrolled who comes from the bottom 50 percent of their high school graduating class rank, or who scores below 910 SAT/19 ACT.

While these recommendations represent extreme responses, high drop out rates have led to a noticeable shift in the “college for all” emphasis of recent years. As my colleague George Leef recently pointed out, even the Chronicle of Higher Education seems to be distancing itself from this concept.

“The exodus (or non-entrance) of many Americans who aren’t inclined toward academic pursuits will hugely deflate the college bubble,” he writes, “but will also allow schools to better serve those who truly desire deep and advanced study, not merely prolonged high school.”

Stille’s formula demonstrates that policymakers and the general public should be motivated to jumpstart this exodus. In the endeavor to push for universal access to higher education—where a bachelor’s degree is imagined as a springboard for upward mobility—universities have conned students, their families, and taxpayers into spending billions of dollars, only to learn a large share of students were not prepared for rigorous college curricula.

While legislators may not be entirely aware of the completion crisis in state institutions, Stille argues that universities are.

“Student completion success as seen through admissions data is simple to conduct,” writes Stille, “but hardly any institutions do it because they do not want to see the potential negative results.”

State lawmakers must create more pressure for schools to improve completion rates. As elected officials entrusted with taxpayers’ money, they must question why so many schools admit underprepared students.