Prepublication copy
1146 College Get Failing Retention Grade: US Colleges Lose at Least $16 Billion from Attrition:
The Affect of Attrition on the Budgets of 1668 Four-Year Colleges and Universities
Prepared by
N.Raisman & Associates
December 2010
This report is a first-time study of the relationship of attrition to lost revenues in four-year public, private and for-profit colleges and universities on an annual basis. It is based on data collected from colleges and universities directly, IPEDS, the Educational Trust, college and university websites and reporting, as well as the College Board “Annual Survey of Colleges 2010”. The report calculated the average six-year graduation and attrition rates of 1669 private, public and for-profit four-year colleges and universities then applied predicative formulas to determine the amount of revenue lost by the schools due to attrition for the 2010-2011 academic years.
Revenue lost from attrition
The 1669 colleges and universities lost revenue due to attrition in an amount close to $16.5 billion ($16,451,945,426) with the largest single school losing $102,0533,338 the smallest single loss being $10,584; and the average school losing $9,910,811
The publicly assisted colleges and universities averaged a $13,267,214 loss from attrition; the average private college or university lost revenue of $8,331,593 and for-profit schools lost an average of $7,921,228.
These are dollars which may have been calculated into the budgets of the schools but are still dollars not received as revenue. They remain as losses to revenue and at the very least $16.5 billion dollars left on the table.
Grading schools on graduation
If the 1669 colleges and universities were graded as they grade students on an A through F with an A equal to a graduation rate of 90% or more; B 80-90%; C 70-80%;D60-70% and any graduation rate under 50% equal to an F the breakdown would be
43 A’s
101 B’s
165 C’s
259 D’s and
1132 F’s.
1669 schools would be earning a national average grade of D (51.52%) if this were a college classroom. They would be failing.
What strikes the researchers as significant is not merely the massive amount of money colleges and universities lose from attrition but that schools that graduate an average of less than 40% of entering students can attract new enrollment at all. Moreover, it is hard to understand that four-year colleges and universities that graduate less than 20% of an entering class even over a span of six years can remain at all attractive to potential students and remain in business. Furthermore, federal funds continue to support schools that cannot retain and graduate more than 20% of their students.
Some Immediate Observations
It is interesting to note that of the 43 schools that graduate 90% and more of an entering class, only three are public institutions:
University of Virginia
University of California – Los Angeles and
The College of William and Mary.
The other 40 are all private schools.
Of the top 43 institutions with an average 6-year graduation rate higher than 90%, most are “name brand schools” except for two small unbranded private colleges: Apex School of Theology (NC) and Sinte Gleska University (SD).
Of the 43 lowest graduation schools, all with a graduation rate less than11%, 20 are private schools, 16 for-profit and 7 public institutions. One is a theologically-oriented school and one a tribal college.
No apparent patterns come out of the study related to explaining attrition such as size of school; public, private or for profit; costs; Carnegie level. What is apparent however is that every school in the study lost significant sums of money from attrition. This is revenue that could have been captured in part to help during a time of fiscal uncertainty and contraction but was not.
Additional Consideration to Improve Retention and Revenue
Though no apparent patterns came out of the data as has also been found in other studies on graduation rates (which are the flipside of attrition rates), it is recognized that the schools could improve their retention rates by up to 84% if they focus more on student needs and concepts of returns on investment.
The 84% is a figure derived from seven annual studies2 of why students leave a college. They might transfer to another school but they drop out of the first school and take their tuition and fees with them. The results of the seven studies done with 2,400 students each after the students were out of a school for at least six months to allow students to respond to the study without emotional bias toward the school they left are below.
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The four major reasons students leave account for 84% of the attrition rate:
1. College doesn’t care,
2. Poor service and treatment,
3. Not worth it, and
4. Schedule.
These are all issues related to academic customer service3 (and thus can all be addressed by the institutions to improve retention and revenue. In fact, by addressing these issues successfully they could increase population by as much as 84% of the total number of drops. So for instance, a school that was losing $1,000,000 a year from attrition could recoup up to $840,000 by attending to the for academic customer service issues.
These are all issues related to academic customer service3 and thus can all be addressed by the institutions to improve retention and revenue. In fact, by addressing these issues successfully, they could increase population and thus revenue by as much as 84% of the total number of drops. So for instance, a school that was losing $1,000,000 a year from attrition could recoup up to $840,000 by attending to the four customer service issues.
An initial consideration of schools should be whether or not the students that they admit might actually realistically be successful in the institution. It needs to be assumed that schools accept only those students they believe have a strong likelihood of succeeding in their studies and the culture of the institution. To do otherwise would have to advance a cynical supposition that schools accept and enroll students they know may not succeed just for their tuition, fees and collateral revenue. If this were so, they are doing a poor job of it since so many students leave the schools.
Finally, the study raises concerns about the future financial well-being of those schools scoring a grade of D and certainly those scoring a grade of F. How they can maintain a budget that can produce academic viability and quality needs to be looked at. When a college or university is losing 60 to90% of its potential revenue, its needs to be a concern.
Moreover, when schools are losing 80-90% of their student body every year, it should be questioned not just what they are doing wrong but if any students should enroll there? Considering that the odds of graduating at the average school is less than an even bet at 1401 of the four-year colleges and universities. Students and families are “flipping a coin” for the odds of getting to the diploma which they seek at college for the future the college has marketed.
It may be argued by some that even exposure to college education is a plus and thus students who do not graduate have bettered themselves through their attendance. This is a self-serving and fallacious argument. Students enroll and attend college in search of the degree that will open the doors to a job and better life for them. Leaving college without a degree is in most every case not a gain but a failure of the school and student. The student has lost an opportunity and the money paid to attend college while the school loses future revenue and the opportunity to complete its mission for that student.
And as this study shows, the loss of revenue from attrition for schools is significant and hurtful to the financial well-being of colleges and universities. The financial and personal losses to the students are equally significant.
Calculations
The formula used for calculating projected attrition loss was taken from Customer Service Factors and the Cost of Attrition: Revised and Expanded.4 92010) The formula is expressed as [(P x A ® SL) x T)]/2 with P representing a school’s Fall FTE population; A is the six-year annual attrition rate. So P x A yields SL, students lost then multiplied by T tuition. This is divided by 2 to account for the justifiable assumption that students drop after the first day and tuition is collected for the first semester from them but not the next. The formula does not account for uncollected tuition which will vary from school to school and add to the total loss.
Population in each school was reduced by 7% prior to the calculation for total revenue lost to take into account the findings of the IES report Persistence and Attainment of 2003-04 Beginning Postsecondary Students After 6 Years (2010)5
The attrition rate is a calculated annual average for the years 2003-4 through 2008-9. Using a 150% time to graduation rate provides the most accurate way of projecting each school’s losses from attrition for two reasons. First, it allows for a lenient calculation of graduation rates by not holding four-year colleges to a four year standard. This is in keeping with the accepted recognition that the average time to graduation is 6-plus years nationally. Second, the average provides for a more consistent attrition rate since the variation in rates from year to year for most all schools exists in a very small range of variance (+/- 2.36%). Thus what was the attrition rate from one year will be very close to the next and the use of a six year average mitigates variations.
It may be that in some schools the average graduation time is actually more than six years such as might be argued by some of the on-line schools such as the University of Phoenix On-Line but that information is internal and not reflected in the public numbers. Further, the calculations already incorporate a seven percent persistence rate as discussed earlier in the report.
Transfers Out
The issue of the number of students that transfer out of a particular school is not significant to this study since the objective is to look at the total number of students lost. If they are lost through transferring to another school, dropping out or even “stepping out with intentions to return at some date, they are still losses which in turn yield revenue losses to the university or college.
1. Jean Johnson and Jon Rochkind with Amber N. Ott and Samantha Dupont “With Their Whole Lives Ahead of Them, 2008, Public Agenda; Frederick M. Hess, Mark Scheider, Kevin Carey and Andrew P. Kelly “Diplomas and Dropouts: Which Colleges Actually Graduate Their Students (and Which Don’t) 2009, American Enterprise Institute; William G. Bowen, Matthew M. Chingos and Michael S. McPherson Crossing the Finish Line: Completing College at America’s Public Universities 2009, Princeton University Press; Alexandria Walton Radford, Lutz Berkner, Sara C. Wheeless and Bryan Shepherd, “Persistence and Attainment of 2003-04 beginning Postsecondary Students: After 6 Years”. 2010; IES/NCES.
2. Neal Raisman, Customer Service Factors and the Power of Attrition: Revised and Updated, 2010; The Administrators Bookshelf.
3. N. Raisman in The Business of Higher Education Volme 3: Markeitng and Consumer Issues by John C. Knapp and David J. Siegel, 2009;Praeger.
4. Neal Raisman, Customer Service Factors and the Power of Attrition: Revised and Updated, 2010; The Administrators Bookshelf.
5. Alexandria Walton Radford, Lutz Berkner, Sara C. Wheeless and Bryan Shepherd, “Persistence and Attainment of 2003-04 beginning Postsecondary Students: After 6 Years”. 2010; IES/NCES.
Tables
1. Colleges and Universities Alphabetically
2. Colleges and Universities by Graduation Rates
3. Colleges and Universities by Attrition Rates
4. Colleges and Universities by Revenue Lost (most to least)
5. Private Colleges by Revenue Lost (most to least)
6. Public Colleges by Revenue lost (most to least)
7. For-Profit Colleges and Universities (most to least)
8. Colleges and Universities Graded
If you wish to see any of the tables, just write to me at nealr@greatservicematters.com and I'll be happy to share them. I am accepting comments and suggestions as we finalize the report for publication. Thank you
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