Addressing the Student Retention Problem

by Rachel Bishop | August 13, 2019
Addressing the Student Retention Problem

Part one of a three-part series on how educators can meet and surpass retention goals by adapting tactics and creating a welcoming campus to better engage today’s at-risk and underrepresented students.

The student retention problem

One in three students who enroll in postsecondary education in the U.S. never complete their degree. As a result, colleges and students both pay the cost. Institutions that invest a lot of time and money to recruit students forgo the expected tuition for each student who leaves. Ultimately, this impacts their operating budget and the services they are able to provide. For example, say the average cost to attend a public four-year college is $10,000 per year. The loss of revenue from just 50 students departing after their first year will be $1,500,000. Add to that the loss of revenue from fees, residence halls, cafeterias, bookstores, etc., and the total soars. Furthermore, in today’s social media environment, a negative experience by one student can quickly spread to potential future students, decreasing the next pool of applicants. [1]

Due to demographic shifts, the number of graduating high school seniors is expected to decline in the next decade. Colleges will face shrinking pools of applicants and a more competitive recruitment process. This will make it even more imperative to retain the students they have.

Enrollment declines

Enrollment declines are a particular risk for small private schools that offer smaller class sizes and more attention from faculty but lack economies of scale, making it more expensive to serve each student. Historically, these institutions have relied on the model of tuition discounting (reducing sticker price for lower-income students) to meet enrollment needs. However, tuition at many schools has reached a ceiling of what the market will bear, fueling the student retention problem. With lower endowments than elite schools, less competitive, lower-tier schools are at risk of pricing themselves out of the market. The total amount of awards paid out at many schools is dangerously close to surpassing the amount of tuition coming in. These institutions must be able to retain and graduate each and every student who comes in.

The rising cost of college

For students, not completing a college degree can seriously impact their financial future. In the last decade, tuition rates have climbed 56 percent. This is three times more than the rate of inflation. While state spending for higher education was drastically reduced during the recession, it has yet to be fully reinstated in most states. In some cases, it continues to be cut. State spending for higher education is currently 16 percent lower than it was in 2008. As a result, colleges and universities have raised tuition significantly, adding to the student retention problem. However, family income has stagnated and the Federal Pell Grant has not kept pace. In many cases, Pell does not cover the full cost of attendance, creating a gap that students and their families struggle to fill.

The impact on students

Regardless, students who enroll but do not earn a credential must repay their loans. Those who drop out are left with high student loan debt but cannot get jobs with a high enough salary to pay off that debt. To further compound the problem, the inability to repay a student loan makes it harder to borrow for future investments such as starting a business or buying a house or car. Plus, a postsecondary credential is becoming more and more critical to earn a living wage in the current “knowledge economy.” This shift automates either portions of jobs or entire positions altogether. In order to succeed, employees need the higher-level critical thinking and job-specific technical knowledge that higher education provides. Students today are stuck with a high-pressure choice. They need a postsecondary credential to enter the workforce, yet the significant risk of high debt associated with enrollment is a factor.

Those with a higher education degree are by and large better off. They are healthier, less likely to rely on public assistance programs, less likely to be incarcerated, and more immune from periods of unemployment. They are more likely to contribute to, rather than draw from, the tax base and the economy.

The debt crisis

Student debt has become a major financial crisis. Today, more than 44 million adults owe about $1.5 trillion in student loans. The average student graduates with $37,172 in loans with a monthly loan payment of $400. Default rates have more than doubled in the past decade. By 2023, we expect almost half—a whopping 40 percent—of borrowers to default on student loans. This will have serious consequences for the U.S. economy as a whole.

In short, colleges and universities must work to retain the students they have and support them through to graduation. And in order to do that, they must understand who their students are. We will address those most at risk of not completing a postsecondary credential in our next blog. For the full background and steps you can take to improve student retention, download our ebook below.

* Special thanks to our guest author, Alice Anne Bailey, PhD, a Higher Education Consultant.

[1] See Alan Siedman’s Crossing the Finish Line: How to Retain and Graduate Your Students (2018)

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