Friday, March 06, 2009

College Attrition Costs US Over 4 Billion Annually


Hardly a day goes by without a college announcing jobs, programs or spending cuts.


You’d think with all the brainpower at our colleges and universities they would be able to come up with better solutions than lopping off people, sections and services to students. But they don’t seem to. Why not?


For organizations preparing students and society for the future, we seem to still be stuck in the past at least when it comes to thinking about enrollment. The churn and burn of continually bringing new students through the front door, and then just watching them go out the back door is killing college enrollments. And individual and institutional futures. As students drop out, budgets, employment, class sections, services and the ability to meet the educational mission go down. Tuition and fees go up.


In Ohio where I consult with the Chancellor for example, the average non-graduation rate for all colleges and universities is about 48% over six years. That means the average Ohio college or university loses up to almost half of its population. The average state-assisted four-year schools have a slightly higher 53% six-year attrition rate. These are four-year or more selective schools. They choose who can be accepted; who they believe is capable of succeeding. Community college attrition rates are higher but they are non-selective. They accept any student who wishes to try to succeed and that is going to open them up to much greater attrition.


The cost of attrition to students who leave (most drop out rather than flunk out by the way) is extremely high for them, our society and culture. Most leave feeling as if they failed in some way even though 72% usually leave because of what has been identified as weak to poor academic customer service. Their educational and personal needs were not met. Many dropouts also use their college savings, financial aid and ability to obtain a college loan. Many will not go back to school. They become part of the State’s employment problem.


When students drop out and do not graduate, the schools lose their ability to meet their educational mission as well as their chance to assist people and our state to meet career and intellectual goals. And they lose millions of dollars a year; something neither individuals not taxpayers can afford.


It costs an average of about $6,000 to recruit, enroll and process each new college or university student. So, every student who leaves takes at least $12,000 out the door with him or her. The dropping student takes the $6,000 average financial investment the school made to recruit and enroll him or her initially. The lost student must also be replaced so that will cost another $6,000 recruitment and enrollment cost. Since not every drop out is replaced immediately, tuition revenue is also lost equal to the number of dropouts times tuition cost.


Let’s look at Mammon University as an example. Mammon has a six-year dropout average of just about 56%. With 10,989 undergraduate student population and tuition of $8,055, Mammon annually loses around $8.2 million from attrition. So, if MU increased its retention/graduation rates it would save many millions of dollars annually. Millions it could use to fund programs, faculty, additional course sections, equipment, etc. and eliminate cuts. Mammon would save millions.


Nationally, the US has an average publicly assisted college undergraduate retention rate of just 44.61%. Public colleges and universities collectively lose more students each year than graduate. Calculating 6,837,605 students in publicly-assisted four-year colleges paying an average of $6,585 tuition, US public colleges and universities lose an average of $4,156,615,977 annually. Add in direct public support of about another $5 billion a year and we are starting to talk numbers big enough to be concerned with attrition.

To see how a focus on retention could benefit publicly-assisted colleges, the State of Ohio will be our example. Ohio’s state four-year has a total of 182,631 undergraduate students who drop out at an average 6-year rate of 55.26%. That is within a few percentage points of the national average. Tuition ranges from a high of $ 12,033 to a low of $5,294. The average tuition is $7,911. As a result, Ohio lost an average $115,678,232 a year over the past six years for a six-year total revenue loss from attrition of $694,069,390.


So, focusing more on helping students stay and graduate would have significant results for individual states, the nation, its citizens and economy. Not that Ohio or any other state or its colleges and universities could use additional money and more college grads…. Just by making retention at least as important as admissions. This change would require colleges to change their thinking to turn churn and burn into learn earn


Could this happen? Yes! In fact, right now Ohio Board of Regents Chancellor Eric Fingerhut is getting ready to recommend a new higher education funding formula that will reward results based on specific performance measures. The new formula will focus on retention and on graduates rather than fall numbers reflecting new freshmen and current start population for all of the State colleges. This is a bold and needed move that will have long term positive effects for the state colleges and universities and Ohio. It could and should become a model nationally as well.


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“We had hoped we’d improve our retention by 3% but with the help of Dr. Raisman, we increased it by 5%.” Rachel Albert, Provost, University of Maine-Farmington

“Neal led a retreat that initiated customer service and retention as a real focus for us and gave us a clear plan. Then he followed up with presentations and workshops that kicked us all into high gear. We recommend with no reservations; just success.” Susan Mesheau, Executive Director U First: Integrated Recruitment & Retention University of New Brunswick

“Thank you so much for the wonderful workshop at Lincoln Technical Institute. It served to re-center ideas in a great way. I perceived it to be a morale booster, breath of fresh air, and a burst of passion.”
Shelly S, Lincoln Technical Institute

6 comments:

Tom Rebstock said...

Very nice in-depth discourse on why students are customers as well as learners. I do find quite a bit of opposition to this concept among faculty. Thank you for some good examples and verbage I can use!

positivetrends said...

Neal, this is a very interesting look at the state of customer service in the University community. Ultimately the schools responsibility is to their client, which is the student.

I would be interested in knowing the sourcing of your numbers stated above.

Regards,
Richard

Neal Raisman - AcademicMAPS said...

The numbers have been pulled together from a number of sources so we could cross check the self-reporting of schools. A primary source was published school reports, web sites and responses to requests for information. This was checked against federal sources, sources such as The Education Trust and other printed and web-based materials. We assessed numbers against one another to determine an accurate or at least an average conservative number.

Hopes this helps answer some of your questions. Feel free to get in touch at nealr@GreatServiceMatters.com. When things slow down a bit with client colleges, I will finish and publish the full report

Chanen said...

Great comments on how higher education must change to meet the needs of it's customers - the students. InsideTrack http://www.insidetrack.com is an organization dedicated to student success and retention. They have developed a great program that delivers measurable results that include increased student engagement and academic achievement, a 2.5 to 3 percentage point improvement in yield rate, and a 20% reduction in attrition. Their coaches work with prospective students to envision what they want from college – and map out a plan to make it happen. Daily contact and coaching ensures that prospective students have the resources they need to successfully make the transition to college, and to succeed once they begin. Coaching discussions range from creating a vision and setting high level goals to guiding students through detailed admissions and financial aid processes, making sure that students meet critical deadlines.

Andrei said...

I stopped reading your post after this:

"It costs an average of about $6,000 to recruit, enroll and process each new college or university student. So, every student who leaves takes at least $12,000 out the door with him or her. The dropping student takes the $6,000 average financial investment the school made to recruit and enroll him or her initially. The lost student must also be replaced so that will cost another $6,000 recruitment and enrollment cost. Since not every drop out is replaced immediately, tuition revenue is also lost equal to the number of dropouts times tuition cost."

This reasoning is just plain dumb. The college's loss per student is the cost of the investment LESS the total tuition
paid. If annual tuition exceeds the $6000, which it usually DOES, the college has recovered the investment after the first year, already! What's more, you're counting $6000 losses too many times when you discuss replacing dropouts: if you lose a student from a cohort, you won't recruit a new student to the SAME cohort; students are always recruited for NEW cohorts.

The total cost is (cohort size)*((recruitment cost per studentship) - (retention rate)(tuition per annum)(program duration in years)). Given that college annual tuitions exceed the recruitment costs and that paid tuition is unrecoverable, this value is NEVER positive.

The social costs are, however.

Neal Raisman - AcademicMAPS said...

Thanks for the comment on the formula which has some good points. But I fear some of your assumptions are not quite correct. In fact, the $600 is a low calculation. Schools that fully depend on tuition income money spend much, much more. I use the lower calculation to avoid charges of overstating the figure. In fact, many schools are now using up to 30% of the budget for recruitment and enrollment.
The calculations show that a school does not start "Making" money until at least the middle of second semester. So if a student leaves prior to second semester, there is no "profit" at all - just loss. This is why the second semester retention number is so important. Moreover, the number I use is for enrollment only; not for the costs of providing education - teaching, library, staff, etc. Keep in mind that these costs are usually in the 70% range at most schools. So your assumptions, though respectful, are not quite accurate.
As for the cohort replacement, you are somewhat correct but there is cohort replacement that goes on all the time through functions such as transfer in, new enrollment into the cohort, etc. What we need to start thinking about actually is not a cohort, not enrollment but population - the total number of students on campus in a given year. That would help alleviate some of your concerens