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HIDDEN COSTS OF COMMUNITY COLLEGES: New Report Estimates Federal, State, and Local Governments Spent Nearly $4 Billion on Community College Students Who Dropped Out After First Year

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“Taxpayers are investing billions of dollars to support students who never complete their first year.”

Between the 2004–05 school year and the 2008–09 school year, nearly $4 billion in federal, state, and local tax dollars was spent on first-year, full-time community college students who dropped out before earning an associate’s degrees or certificate and did not return for a second year. So says The Hidden Costs of Community Colleges, a new report from the American Institutes for Research (AIR).

“Taxpayers are investing billions of dollars to support students who never complete their first year,” said Mark Schneider, coauthor of the report and a vice president at AIR. “And these students are paying tuition, borrowing money, and taking time away from work to pursue certificates or degrees they aren’t getting. We must pay far more attention to the high costs of low retention rates.”

The report breaks out spending into three categories: (1) state and local government costs to help pay for the education of students who did not return for a second year ($3 billion); (2) states’ costs for the same purpose ($240 million); and (3) the federal government’s costs ($660 million). In the 2008-09 school year alone, the report finds that federal, state, and local governments spent nearly $1 billion on first-time, full-time community college students who dropped out before their second year, which is an increase of nearly 35 percent from five years ago. The report is careful to note that these estimates are only a portion of the overall taxpayers’ costs, as they do not cover part-time students or other government spending such as capital expenditures that help support community colleges.

In addition to providing an overall number, the report breaks out spending in each state. By combining state grants with state and local spending, it finds that eight states (California, Florida, Illinois, Michigan, New York, North Carolina, Texas, and Wisconsin) spent $20 million or more in the 20098-09 school year on students who drop out before their second year.

According to the report, the hidden costs of community college are rising as enrollments increase while completion rates are on the decline. Over the last ten years, community college enrollments have risen by about 25 percent and now total more than 6 million students, the report finds. In 2009, more than 800,000 students started community college, but as the report notes, far too many of these students will fail to reach the finish line and far too few will even make it past the first year. Specifically, the report finds that about 20 percent of full-time students who begin their studies at a community college do not return for a second year. The report identifies the high number of community college students in need of remediation as “one of the most consistently identified barriers” to higher persistence and graduation rates.

“Given the central role that community colleges play in the nation’s plans to regain its position as the number one country in the world when it comes to college-educated adults, and given the increasing fiscal difficulties facing individual states and the nation as a whole, it is clear that ‘business as usual’ is far too expensive,” the report notes. “Better ways are needed to ensure that the students who enter a community college expecting to earn an associate’s degree or a certificate finish the first lap and ultimately cross the finish line.”

The report offers several ways to increase completion, including allowing students to earn credit for proven competencies rather than simply through seat time and using technology to increase flexibility and personalize the rate at which students attain necessary skills. It adds that students, parents, taxpayers, and government officials need access to better data on student learning and the labor market success of graduates from programs and campuses.

Hidden Costs of Community Colleges is available at http://www.air.org/files/AIR_Hidden_Costs_of_Community_Colleges_Oct2011.pdf.

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Economic Impacts

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