The Hidden Costs of Community Colleges

There is little question that higher education is a worthwhile investment.  We regularly hear about the earning power of that college degree, and how those with a college education out-earn those with just a high school diploma by up to a million dollars over a lifetime.  And we can’t miss the regular drumbeat of how some form of postsecondary education is necessary in our 21st century economy, and that just a high school diploma will no longer cut it in our knowledge economy.

We also realize that college is an expensive endeavor.  With some private colleges charging more than $50,000 a year and too many students needing five or six years to complete an undergraduate degree, that worthwhile investment doesn’t necessarily come cheap.  It is no wonder that more and more are turning to community colleges as a a cost-effective path to higher education, whether it be to secure an associate’s degree as a path to a job or to earn a year or two of lower-cost credits before transferring to a four-year institution.  And in some states, we are even seeing community colleges beginning to offer bachelor’s degrees.
In all of this, we often don’t think of the cost of drop-outs in our community colleges.  We worry about those high school drop-out factories, and the third of students who fail to earn a high school diploma.  We fret about the growing number of students who fail to earn their bachelor’s degree, hoping their is a sheepskin effect and that even a year or three of college is of benefit, both intellectually and economically.  But what about community college?
A new study from the American Institutes for Research’s Mark Schneider offers a
startling picture of community college drop-outs, The Hidden Costs of Community Colleges.
  Using data collected by the U.S. Department of Education and submitted by our institutions of higher education themselves, Schneider finds:
* Nearly $4 billion was spent by federal, state, and local governments over the last five years on first-year community college students who did not return for a second year of college.
* In 2008-09 (the last year of available data), nearly $1 billion was spent by government on first-year community college students who did not return for year two.  That is 35 percent higher than it was just five years earlier.
* About a fifth of full-time community college students do not return for their second years of college.
Of course, we also realize that these “drop out” numbers are imprecise.  Using federal IPEDS data is tricky business.  It is the best, worst, and only source of such higher education data.  So while we know when a student does not return for a second year at his or her selected community college, we don’t know where they went.  Did they transfer to another school?  Did they join the military?  Did they depart on missionary work?  Or did they just drop out?
Regardless, the data is still startling.  Why?  Tax dollars — particularly at the state and local level — are in short supply.  We are asking our educational institutions to do more and more with fewer resources.  And we face changing demands and increased requirements in the process.
That community college drop-out cost reflects $3 billion in state and locally appropriated money — read taxpayer dollars — that fails to deliver maximum return on investment.  It includes $240 million in direct grants from the state to the student, another investment that falls short.  And it includes $660 million in federal aid to students, at a time when Pell Grants are under direct assault.
And the costs don’t include the dollars spent by families and students for that first year of community college.  Nor does it include those students who are, or rather were, part-time community college students.  Nor does it include direct federal support or capital investments in those institutions, two other taxpayer-funded supports for the community college experience.
What is the grand takeaway from all of this?  Put simply, we need greater focus on our outcomes.  With taxpayer dollars at a premium and postsecondary degrees almost a non-negotiable in today’s economy, we need to be doing anything and everything to keep kids in school and increase the number earning their degrees.  
If we are serious about honoring President Obama’s promise that the United States will have the highest percentage of college graduates in the world, we must first focus on those who are already in the higher ed pipeline.  What do we do about the 20 percent of first-year community college students who never return for year two?  And how do we better spend that $1 billion a year in taxpayer funds to accomplish it?
(Full disclosure: Eduflack has advised AIR and Dr. Schneider over the years.)

6 thoughts on “The Hidden Costs of Community Colleges

  1. Note the AIR ‘Hidden Costs…’ report only provides total dollar amounts with no per capita figures, no percent of budget figures, no inflation adjustments, and no comparisons with other expenditures. These are required elements for a complete analysis of costs.In addition, the report overestimates the increase in costs. For example, they claim a 35% increase over 5 years without adjusting for inflation or accounting for changes in the number of students. When you adjust for inflation using the federal CPI-U, it is a 23% increase in real dollars meaning they are inflating the costs by over 50%. Ideally, inflation would be adjusted regionally for the most accurate analysis. In addition, the annual values should be divided by the total number of ‘dropouts’ to create a per capita cost to control for changes in the number of students over time.AIR also does no analysis of how much the completers contribute back in taxes or the value of even one year of training. It could be that the completers and partial completers contribute enough back in increased tax revenue to make the overall investment profitable. This is a serious omission in the report. No business looks only at the costs. They look at return on investment. Given these deficiencies with the research, it appears to be of limited value.

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