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How Bad Are Our Graduation Rates?

Sunday, May 2, 2010

U.S. colleges will be challenged to achieve President Obama’s goal of America once again having the highest proportion of college graduates in the world.

In his first speech to a joint session of Congress on February 24, 2009, President Obama said that “by 2020, America will once again have the highest proportion of college graduates in the world.” With the latest release of graduation rate data from the National Center for Education Statistics (NCES), we can grasp the enormity of that challenge. To achieve the president’s goal, colleges and universities in the United States will have to graduate far more students than they presently do.

The Student Right to Know Act of 1990 mandates that any institution of higher education (IHE) whose students receive federal aid (for example, Pell Grants) must report graduation rate data to NCES, but the data are highly flawed. Beginning in 2004, these graduation rate data were based on the percent of beginning students who finished a two-year associates degree within three years and who finished a four-year bachelor’s degree within six. More recently, NCES has begun reporting four-, five-, six-, and, in 2010, eight-year graduation rates for bachelor’s degree–granting institutions and four-year graduation rates for associate degrees. These official graduation rates are based on a cohort of first-time, full-time degree seeking students—an antiquated view of American college students that encompasses less than 50 percent of students in the United States. For example, students who transfer, who enroll part time, and who enroll in continuous enrollment schools are all missed. Indeed, our official graduation measures are so bad that Doug Lederman of Inside Higher Education described the “general consensus” that the only solution was to “blow up” IPEDS, the Integrated Postsecondary Education Data System, the source of these data—a sentiment I fully endorse.

That said, these flawed measures are the only ones we have. So how bad are our graduation rates?

Four-year institutions of higher education graduated less than 60 percent of their students in six years.

Figure 1 shows that in 2008, based on data just released by NCES, four-year IHEs graduated less than 60 percent of their students in six years. Public colleges and universities do a bit worse than not-for-profit institutions, which on average do a bit better. As my colleagues and I have demonstrated elsewhere, the range of graduation rates is far too great, with some schools graduating hardly anyone who starts and others graduating almost everyone. Four-year for-profit schools, such as the University of Phoenix, Kaplan University, and DeVry University, represent the fastest-growing segment of higher education in the United States. However, on average, schools in that sector graduate only around 20 percent of their students within six years.

Schneider 4.30.10

Note that traditional graduation rates do not adjust for differences in the challenges that students present to schools in different sectors—for-profit schools, for example, enroll more students who face a harder time in college (for example, they are far more likely to be married with children or to have been raised by parents with lower levels of education than students in colleges in other sectors). However, even taking these factors into account, clearly some house cleaning is in order. With around 20 percent of IHEs in the not-for-profit and public sectors graduating fewer than one-third of their students, this housecleaning should definitely not be confined to the for-profit sector.

Four-year for-profit schools, such as the University of Phoenix, Kaplan University, and DeVry University, represent the fastest-growing segment of higher education in the United States. However, their graduation rates average only around 20 percent.

Graduation rates from two-year schools are far worse—fewer than one-third of degree-seeking students complete in three years. Note that only about one in five students in public community colleges complete their degree programs in three years. In contrast, graduation rates from for-profit institutions average around 60 percent. Not-for-profit two-year institutions also have high graduation rates, but they represent a small segment of the market (only about 5 percent of two-year institutions are not-for-profit).

How can we meet Obama’s challenge when our colleges and universities are graduating so few students?

In July 2009, in a speech delivered at a community college in Michigan, President Obama laid out an ambitious program, the American Graduation Initiative, that could have made a difference. The program would have pumped $12 billion into community colleges to help meet the 2020 goal. It included $2.5 billion for construction and renovation at the nation's community colleges, $500 million to develop new online courses, and $9 billion for "challenge grants" aimed at spurring innovation in higher education. These grants would have been competitive, requiring IHEs to design new programs or revamp existing ones. Here was an opportunity for the federal government to encourage IHEs to do a better job in graduating their students, but exhausted by the fight over healthcare legislation and hamstrung by the rules governing the reconciliation process, these policies—all of which could have helped enhance graduation rates—were eliminated or emasculated.

The fundamental need to develop alternate measures of graduation rates is still unmet.

The Department of Education continues to talk tough about accreditation (see here; for why such tough talk is needed, see here). And while the department continues to make some improvements in measuring graduation rates, the fundamental need to develop alternate measures is still unmet.

We can look to the states for some changes—their expenditures on higher education and their control over public institutions far exceed any power the federal government has. Indeed, many states are experimenting with performance-based budgeting, especially as their fiscal problems escalate. Unfortunately, their record in sustaining policies that tie budgets to graduation rates is spotty. These efforts tend to be tied to the budget cycle—introduced when times are bad and forgotten when times improve (see here).

In the meantime, far too many students will never earn the degrees they want and need. Without a more muscular response, the president’s higher education goal will languish unmet.

Mark Schneider is a visiting scholar at the American Enterprise Institute and vice president at the American Institutes for Research.

FURTHER READING: Schneider last wrote concerning how the No Child Left Behind law means “We’re Still ‘Lying to Our Children.’” He also described why “Obama’s Education Hopes Face Achievement Realities,” documented with other scholars how some institutions are “Rising to the Challenge” of raising Hispanic college graduation rates, and explained “Where Does All That Tuition Go?”

Image by Darren Wamboldt/Bergman Group.

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