States are wasting $40B a year in higher ed funding.

First, let me share three data points:

1. From the National Center for Education Statistics: “The overall 6-year for first-time, full-time students who began study at a 4-year degree-granting institution in fall 2012 was 62%.”

2. From the National Center for Education Statistics: “The overall 6-year for first-time, full-time students who began study at a 4-year degree-granting institution in fall 2012 was 62%.”

3. From the National Center for Education Statistics: “The overall 6-year for first-time, full-time students who began study at a 4-year degree-granting institution in fall 2012 was 62%.”

These data points are incredibly telling.

First, with nearly 40% of students failing to graduate in a reasonable amount of time, higher ed is dangerously close to making more American families poor than wealthy.  If getting into college only makes someone eligible to take out more debt, they’re worse off for having attempted it.

The failure to graduate rate also means that 40% of a state’s investment in higher education is also effectively “written off,” as it’s not delivering the promised outcomes.

On average, when a student graduates college they will earn $2.4 million dollars more over the term of their life than if they had not. College graduates have lower incarceration rates, rely less frequently on social safety nets, form families at higher rates, have better health, live longer, and are more likely to own homes.  The positive impacts for a state, society, economy and culture that result from graduating college are so large that the case is easily made that states should be investing more and more resources into higher ed.  But, those dollars ought to be accountable.

With state aid totalling almost $100 billion dollars last year, and nearly 40% of students failing to graduate, that’s nearly $40B dollars annually spent chasing positive societal impacts that aren’t realized.

Improving graduation rates should be a critical effort at the state level.  Each 1% increase in a state’s 6-year graduation rate turns nearly $1 billion dollars *already being invested* from non-performing to effective capital.

As an example, Degree Insurance could guarantee every new student who enrolls at a public college in Idaho for around $14 million dollars.  A guaranteed outcome is certain to improve retention and graduation rates at Idaho colleges.  It is hard to see how that wouldn’t be an incredible use of the $900 million dollar budget surplus the state has on hand today.