College Graduation Rates: What You Don't Know Can Hurt

The college admissions season is in full swing, and around the country high school seniors and their parents are actively discussing their college options for next year, filling out financial aid paperwork, and editing and re-editing college essays. For these students and their families, the end goal is a college degree, which they know is a key to economic success.

Unfortunately, not all colleges are created equal when it comes to getting their students over the finish line. Institutions that admit similar students often have widely different graduation rates, and far too many colleges fail to even graduate a majority of their students.

The problem is, this basic indicator of student success is rarely highlighted as something students should consider when choosing a college. Colleges are required to post their graduation rates, but they need not provide them directly to prospective students.

Colleges and universities should be required to provide retention and graduation rates clearly on offers of admission and financial aid.

As a result, every year hundreds of thousands of students make the wrong choice, enrolling in schools where they will fail to make it through their first year--let alone ever receive a degree--when they could have enrolled in schools where their chances of success would have been far higher.

While many disagree about the causes of such failure, analysts of all stripes agree that one step toward a better outcome is improving the information about quality and costs available to prospective students and their families.

But will providing such information actually affect the way parents and students choose between colleges in their set of choices?

We set out to answer this question.

We surveyed a sample of parents of high school-aged students in the five most populous states in the country, asking them to choose one of two public four-year colleges in their state. The two colleges were similar on every dimension except for the graduation rate. All parents received some basic, comparable information about each college, but some parents also received each college's official, federally collected six-year graduation rate.

We found that providing graduation-rate information increased the probability that parents would choose the college with the higher graduation rate by 15 percentage points (read "Filling in the Blanks" here).

Parents with less education, with lower incomes and who felt less informed about the college application process were even more responsive to the extra information, often adjusting their choices by about 20 percentage points or more when provided with graduation rates.

Consider how this information might have shaped the incoming classes at just the 20 public colleges that made up the pairs we presented to parents. There were about 60,000 incoming undergraduates at these schools in the fall of 2008. If parents had that graduation rate information, about 9,000 students would have enrolled in the higher-performing school. That would have led to about 1,000 additional college graduates.

Now consider this: According to the census, college graduates earn about $45,600 as a starting salary, while people who report "some college" make just $31,400. In the first year alone, these additional graduates would have earned more than $14 million than had by attending the lower-performing school. When we project this out across a 40-year career using a standard economic model, 1,000 more college graduates would earn over $350 million in additional wages. And, given current federal income tax rates, these additional graduates would have contributed an additional $40 million in tax revenue.

The federal government has made a major step forward in helping parents and students choose higher-performing schools--when students apply for federal aid, they are told the graduation rates of the schools they specify on their application forms.

But this doesn't go far enough.

Colleges and universities should be required to provide retention and graduation rates clearly on offers of admission and financial aid.

Adding this requirement could pay dividends in the quest to match more students to high-performing colleges, generating large benefits to students and society at a low cost to the federal government and colleges themselves.

Andrew P. Kelly is a research fellow at AEI. Mark Schneider is a visiting scholar at AEI.

Photo Credit: Bigstock/devon

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