What Parents Need to Know About Graduation Rates

​One of the strangest aspects of the college search process is upon sending their children to college, every parent believes and expects that their student(s) will graduate.
 
Unfortunately, the statistics suggest even in the best of circumstances, only 65% will graduate and it will take up to SIX YEARS to do so. It’s essential for parents to understand this reality to better prepare.
 
Nationwide Graduation Rates
Here are the nationwide graduation rates as compiled by the federal government:
 
Four­Year Graduation Rates

• Public colleges and universities: 33%
• Nonprofit private colleges and universities: 53%

 
Six-Year Graduation Rates

• Public colleges and universities: 57%

Nonprofit private colleges and universities: 65%

Why Grad Rates are Overlooked

​Many families simply aren’t aware of the grim graduation statistics because colleges and universities are loath to divulge them.
 
Can you imagine how parents and teenagers would react if they heard during a college tour that five or even six years is a more realistic graduation goal?
 
I’ve actually seen the shock on parents’ faces first hand when I give college talks. During presentations to parents, I almost always hear a visible gasp from the audience when I reach the slide in my presentation that shows the shockingly low graduation rates of many California state universities.
 
To give you an example of what I’m talking about, here is a list of public universities in California that have the very worst four­year grad rates. No. 1 on this hall of shame list is California State University, Dominquez Hills where only 3.8% of its students graduate in four years!

What's Behind College Graduation Rates?

​Reason for high graduation rates 
​Not surprisingly, the most elite schools, which primarily educate wealthy students, enjoy the highest four­year grad rates. The parents of the students attending these schools are much more likely to be able to pay for a bachelor’s degree and watch their children graduate in the traditional eight semesters.
 
Another explanation for high grad rates is that elite schools only accept exceptionally qualified students, who have the academic ability to earn a bachelor’s degree on time.
 
Below are the schools with the nation’s highest grad rates. The University of Notre Dame enjoys the highest four­year grad rate of any school in the country. Graduation rate (100%) refers to the four­year grad rate and Graduation rate (150%) refers to the six­year grad rate:

What's Behind College Graduation Rates?

​Reason for lower graduation rates 
In contrast to the experience of students at elite schools, plenty of other students have to drop out of school, at least temporarily, or transfer to a cheaper institution because they can’t afford to continue. These students can be less likely than their wealthy peers to handle the rigors of college. Another huge problem for students of all income levels at less selective schools is the inability to get the classes that they need to graduate on time.
 
Schools with low grad rates would like families to believe that it’s all the students’ fault for failing to graduate, but this is largely a cop­out! Universities with students from similar demographics can have wildly different graduation outcomes.
 
What’s the explanation for this? Successful universities make it an institutional priority to increase the chances that all their students graduate on time!

What you need to know 
To reduce college costs, it’s important to identify schools that do a better job graduating their students in the traditional eight semesters. One important element to note is the four-year grad rates are based exclusively on students who start out as freshmen as full-time students. Students who begin college part-time do not impact the rates of any schools.
 
You can find significant graduation differences among schools that attract the same kind of student body and that also sport the same price tag.

Example 
Let’s look at two expensive liberal arts colleges that are both located in Amherst, MA.
 
Hampshire College has a four­year grad rate of just 55.6%. Amherst College, which attracts a freshmen class with higher academic stats, has a four­year grad rate of 89.5%. Both of these schools cost more than $65,000!
 
One reason why Hampshire’s four­year grad rate is so low for an expensive liberal arts college is because only 82% of its freshmen return. In contrast, 98% of Amherst’s students return after their first year.
 
When a significant percentage of freshmen leave a school, it hurts the institution’s grad rate since the federal graduation calculation counts those departing against a school’s overall graduation rate.

Check freshmen retention rates 
When researching schools, you obviously also need to check any school’s freshmen retention rate, which provides the percentage of students who stick around for their sophomore year.
 
In addition to being a traumatic experience, unhappy students who leave a school can make a college degree far more costly. Transfer statistics from the National Student Clearinghouse Research Center indicate that an alarming percentage of students ultimately transfer out of their original schools.
 
Among four­-year institutions, 36.5% of students who start at a public college or university end up transferring elsewhere and 34.3% of students at private nonprofit schools transfer too.

Looking Beyond Grad Rates

A mediocre grad rate shouldn’t be an automatic deal breaker.
 
If a grad rate is troubling at a school of interest, investigate why the graduation rate is low. Does the school have an online degree program? The graduation rates of on-campus students vs. online students will often differ.  Are there differences among programs? Families need to research what it takes to graduate in four years. Being in an honors program at a state university, for instance, could make the path to a four-­year degree smoother. In contrast, students pursuing engineering, nursing or some other majors might find it difficult to graduate in the traditional four years at some institutions.
 
A little bit of research can go a long way toward making smarter college choices and potentially saving significant dollars if it improves the likelihood of your student finishing in a shorter timeframe. Remember, a fifth or sixth year of college not only increases costs, but they are the most expensive years of college due to tuition inflation.

​Question: We know we will need to buy a new car within the next year or two. Is it important to incur this kind of debt before applying for financial aid so it’s reflected on the financial aid forms (and colleges know that money isn’t available to pay for college)? Or do colleges even want to know about your debt?
 
Answer: If you buy a car, you will have fewer assets in your nonretirement account. Less assets means you will have a lower Expected Family Contribution.
 
Your EFC is what you would be expected to pay, at a minimum, for one year of college. This figure is generated by the financial aid formulas after you complete the aid applications that request your income and assets. The lower the EFC, the greater the eligibility for need-based financial aid.
 
Let’s say, for instance, that you spend $30,000 to buy a new car and will have that much less in your bank account.
 
With the $30,000 gone, your EFC would drop by $1,692. Put another way, your eligibility for aid would only increase by $1,692. Depending on your circumstances and the school your child is attending (a state school vs. a private school), this aid may or may not come in the form of free money. At many state schools, there is a good chance most of this aid would simply be awarded in the form of loans.
 
I arrived at the figure above by multiplying the $30,000 in assets by 5.64%, which is the percentage the FAFSA assesses parental assets. The PROFILE assesses parent assets at no more than 5%.
 
And, as a practical matter, your EFC may not drop at all or by much less because of asset protection allowances that the Free Application for Federal Student Aid (FAFSA) and CSS/Financial Aid PROFILE use to shelter some of the nonretirement assets that parents possess.
 
Finally, if you borrowed money to buy a new car, this would not help your chances for financial aid at all. The aid formulas don’t care about your consumer debt.
 
Bottom line: Don’t spend money in your savings and checking accounts if your only motivation is to obtain more financial aid.

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The opinions voiced in this ​material are for general information only and are not intended to provide specific advice or recommendations for any individual.