The Hidden Cost of Dropouts

It’s obvious to all that a student dropping out of university is a bad thing. The university loses tuition fees and the student has likely wasted some of their time and money, although it is critical to understand that dropouts start happening from the pre-arrival stage. With that being said, it is also very difficult to truly understand what is the summary of all costs on a student level, a university level, and a national level of dropouts. This article is based on the two reports by Step & Ripple to enlighten our understanding on just how badly a high dropout rate can plague the Higher Education industry and a national economy.

There are any number of reasons why a student might drop out of university. This NCES 2024 Report indicates that 23.3% of full-time undergraduates in the US leave university without a degree. The cost to each student who drops out goes beyond what is understood at face value. Firstly, in many cases if drop outs occur mid-term you are still liable to pay tuition fees for the full term. The same can be said for housing & accommodation - if a lease agreement is signed you are liable to fulfill that contract regardless of when you drop out and if you want to leave to go elsewhere. Secondly, your eligibility for future student loans can significantly decrease. Finally, the income disparity between graduates and non graduates is substantial. For example, in England those with a graduate degree earn an average annual salary of £42,000, in contrast, those with no university degree earn an average annual salary of £26,000 – a full £16,000 (Step).

According to the Educational Policy Institute student dropouts cost colleges more than $16 billion in lost revenue every year. It’s necessary to understand that a university doesn’t just lose tuition fees. They lose out on additional revenue/economic value such as receivables through housing, food, bookstore purchases, alumni donations and support, and of course, reputation. Another consideration of high attrition is the increased workload, and thus expense, for marketing and recruitment teams. Picture this: your university typically graduates 1000 students per intake with an attrition rate of around 20% historically. Wouldn’t it be nice to budget marketing and admissions expenses to just enrol those 1000 students? Alas, no. You have to spend more to effectively try and recruit 1250+ students knowing many will drop out. Education Insights Blog estimates that in the US the total recruitment cost per student is around $2800 for private institutions, and $500 for public ones. Continuing with the example above, their dropout rates are wasting $700,000 if it’s a private university, or $125,000 if it's a public university, annually - and that’s before you consider tuition revenue loss!

On the national level, the effects of dropouts are immense. In 2019 Ripple Effect conducted a research analysis on what the national economic benefits would be in the US if universities could graduate as many students and high schools currently (84% at the time) do. Here is a summary of their key findings:

• Increase employment by 107,400 
• Increase annual wages for 730,000 additional two-year degree holders by an average of $4,849;
• Increase annual wages for 520,000 additional four-year degree holders by an average of $19,034;
• Reduce the number of people in poverty by 48,000
• Over the course of their lifetimes increase the amount of local, state, and federal tax revenue by more than $90 billion.

⭑note - these numbers are on a per year basis

In conclusion, the dropout crisis in higher education extends far beyond the immediate financial losses experienced by students and universities. With both direct and indirect costs affecting institutions, national economies, and individuals, it is crucial to address the root causes of high attrition rates. It all starts in the recruitment stage, struggling universities must adapt their recruitment strategies to make sure they connect emotionally with their offer-holders and introduce a sense of belonging from the very start. Students with an emotional attachment (known as affective commitment) to their university are less likely to drop out.

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