A Risky Bet: Billions in Tax Dollars Fund Lowest Performing Institutions

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How much money would you bet on a casino game where you only win 25% of the time? How about one where you only win 10% of the time? When it comes to higher education, the federal government makes this bet with taxpayer dollars every year, and it’s in the billions.

Last year, the federal government gave institutions of higher education nearly $130 billion in federal student aid (not including educational tax benefits) to fund the education of 10 million students under the implicit assumption that these institutions will provide students with the opportunity to gain the knowledge and skills they need to better their lives.1 Yet, like your odds of winning thousands from a scratch off at your local 7-11, far too often this bet just isn’t paying out.

Graduation Outcomes

Those who complete a bachelor’s degree earn about twice as much as those who only graduated from high school.2 But those who start college and don’t complete are the most likely to default on their students loans—even though they often have much less loan debt than their degree-holding peers.3 With debt and no degree, non-completers often end up in a more difficult situation than if they had never attended college in the first place.

Yet last year, U.S. taxpayers sent close to $3.2 billion to 106 institutions that graduated fewer than 10% of their first-time, full-time students.4 This amounts to over $8.7 million taxpayer dollars per day going to institutions where students have more than a nine in 10 chance of not finishing. Out of the more than 91,500 first-time, full-time students these institutions enrolled, fewer than 9,150 of them earned a degree at the institution where they started.

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