College Dropouts Cost the Economy Billions

A new study shows that just one class of college dropouts costs our economy at least $4.5 billion a year.

Some college dropouts—Steve Jobs or Mark Zuckerberg, to name just two—manage to pump serious cash into the economy as well as their own wallets, but the vast majority of students who leave school without finishing their degrees obviously don't have the same success. According to a new study by the American Institutes for Research, college dropouts cost themselves and the economy at least $4.5 billion in lost earnings and federal and state income tax revenue every year.

AIR found that among the more than 1.1 million students who started college in 2002, almost 500,000 didn't graduate within six years. Those students "lost a total of approximately $3.8 billion in income in 2010 alone," the report found, which "would have generated $566 million in federal income tax revenue, while states would have collected more than $164 million in state income taxes."

The economic impact of dropping out doesn't stop at income and tax revenue. If a student has gone to school for a couple of years , he may have taken out loans to finance his education. Without the earnings boost that comes from a college degree, these students are likely to struggle to pay back their student loan debt, setting themselves up for default—in turn, hurting our economy even more. And at a time when people without degrees have higher employment rates, college dropouts are more likely to need government-provided social services like food stamps.

Of course, the majority of students don't drop out because they're lazy and don't feel like going to class. Affordability is a huge factor—if you're working so many hours that you don't have time to study or go to class, quitting can seem like a good idea. And since research shows that students who build relationships with classmates early in their college experience are less likely to drop out, Bill Gates (himself a famous dropout) is investing in a Facebook app to facilitate such connections.

The multiplier effect suggested by the AIR study is pretty frightening: If 40 percent of every class of freshmen don't finish their degrees, the economic impact on the nation is undeniably staggering. The myriad efforts to encourage more students to go to college are valuable, but this research shows the need for increased focus on making sure students make it to graduation day.

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