The Economic Impact of Increasing College Completion


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Sophia Koropeckyj, Chris Lafakis, and Adam Ozimek
Commission on the Future of Undergraduate Education

There is increasing evidence that smart investments in the education of college students from disadvantaged backgrounds can raise their college completion rates by meaningful amounts. The celebrated Accelerated Study in Associate Program (ASAP) at the City University of New York (CUNY) shows that a combination of more generous financial aid, free public transportation, and other steps that encourage students’ rapid progress can raise completion rates by roughly 50 percent at a cost that is about 50 percent higher than the standard CUNY program for full-time students. As a result of improved graduation rates, ASAP has lower cost per completed degree than the regular program.

An increasing number of other community colleges and public universities report similar improvements in degree completion through introducing programs that emphasize structure and support for students. Such programs, often referred to as “guided pathways,” track student progress very closely, in some cases relying on Big Data to help identify pathways that work well for students with particular characteristics, and also to help identify data that signal that a student is falling off the path to success. Advisors are trained to intervene rapidly to help a student get back on track and to ensure there is ongoing adequate financial support. These programs aren’t free of cost but as with ASAP, they can often actually lower the cost per completed degree, which is after all the source of the main “payoff” to higher education. Of course, these efforts don’t work for everybody and our knowledge of how to make them work in varied settings is still developing.1

These early successes have led the American Academy of Arts and Sciences’ Commission on the Future of Undergraduate Education2 to investigate the costs and benefits of a sustained investment program aimed at boosting program completion rates, especially for disadvantaged students. Some of the benefits of greater educational success for students are easier to quantify than others. More active and effective participation in community and civic life is an important benefit of a better educated population, but one that is hard to put a number on. There is evidence that greater educational success translates into better parenting, reduced likelihood of criminal activity, and so on—perhaps quantifiable in principle but not readily in practice.

Still, one of the best established and most easily quantified outcomes of college success is improved employment prospects and higher incomes. For example, typically people with only a high school degree are roughly twice as likely to be unemployed as are bachelor’s degree holders of the same age. Substantial and persistent earnings benefits are likewise well-established. Moreover, these economic benefits extend not only to individuals but to the economy as a whole, as college-educated workers spend more time in the workforce and display higher productivity while working. We also know that the economic benefits of working in a better educated community “spill over” from the individual workers to the productivity of the entire community.

But while the benefits are real, raising the educational level of the workforce also entails significant cost. Programs to boost completion rates at individual institutions usually involve added expenses, as does investing in better college preparation in earlier education. While schools and colleges, even as they make these investments, may be able to save money in other ways, perhaps through technology or cutting back on lower priority programs, it would be wishful thinking to assume that we can substantially improve educational success for disadvantaged students without investing money in the effort. Besides the direct costs of investing in programs like ASAP or “guided pathways” models, there are also indirect costs of improving college completion. As dropout rates fall, students will stay in school and out of the labor force longer. Older adults will often leave or else cut back their hours on their current low-paying jobs as they invest in a better future. These are real costs to the economy in the near term.

A natural question to ask, therefore, is whether the economic benefits of investing in improving the educational level of the workforce exceeds or falls short of the economic costs. Putting non-economic benefits aside, is a national program of investment in college success a winner or a loser in purely economic terms? We recognize in embarking on such an effort that no precise or definitive answer to this question is possible. Our knowledge of “what works” in boosting college completion, while growing, is still incomplete. The future payoff to greater investments in education is not known with certainty, even though education has in the past always had a positive return, and the payoff is as high now as it has ever been. Some people claim that we are already educating nearly everybody who can benefit, but that claim is dubious in light of the fact that a number of other countries now have a larger fraction of their younger cohorts completing college than the United States does.

Despite these unavoidable uncertainties about the analysis, the Commission judged that a well-informed effort to estimate how the costs and benefits of a systematic program of investment in improved college completion would pay off over time was worthwhile. To develop this study, the Commission turned to Moody’s Analytics, an economic consulting and forecasting firm headed by Mark Zandi. The details of their assumptions and findings are spelled out in the pages that follow, but it may be helpful here to provide an overview of the setup and conclusions.

The basic framework is one in which systematic investments are made in improving graduation rates (at both the associate and baccalaureate levels). The assumption is that the investments will result in increasing by 50 percent the graduation rates of students who now are in the bottom half of the distribution of institutional graduation rates and increasing the graduation rate of those in the top half by a somewhat smaller percentage. The model assumes that improvements will be phased in over a ten-year period during which graduation rates gradually improve. For example, an institution with a 40 percent graduation rate would improve to a 60 percent graduation rate over a decade. (Note that a program of this kind will be especially valuable for low-income and minority students, who disproportionately attend institutions with low completion rates.) Because of uncertainty about how expensive reaching this result would be, Moody’s analyzed two sets of assumptions: first, that costs would rise by 50 percent per student to achieve the improvement in completion; and, second, that they would only need to rise by 25 percent. These numbers appear to be broadly consistent with the experience of programs like ASAP at CUNY or the intensive advising program at Georgia State University that succeed in raising program completion rates substantially.

The costs of this program are borne mainly during this initial investment period, when some combination of public and private funding must pay the cost and when a larger number of people are out of the workforce attending college. Thus, at the end of the ten-year investment period, the costs of the investment program substantially outweigh the benefits generated by the additional students who have completed their programs. But this picture starts to turn around as the productivity benefits of the workers who have completed their associate or baccalaureate degrees begin to grow. Younger students entering the workforce for the first time as college completers bring more education and higher productivity than the less educated workers who are retiring from the labor force. While for simplicity’s sake the focus of the analytical model is on these younger students, the same logic applies to older adults deciding to return to (or begin) postsecondary education. Older workers who have left the labor market for more schooling come back to work earning more money (and producing more output) than before.

The analysis shows that beginning in the eleventh year of the program, the cost-benefit balance begins to turn around, and in every year thereafter output and earnings in the economy are higher than they would have been without the investment. Thirty years after the inception of the program, average wages in the workforce are estimated to be 3.1 percent higher than they would be without the investment, with the gains concentrated on those who would not have achieved degrees without the program. The program is projected at that time to have raised gross domestic product by 2.5 percent compared to a baseline, which projects recent rates of growth in completion. During the period from twenty to thirty years out, when the net benefits of the program are fully in place, annual GDP growth is about 10 percent higher than it would be without the program (1.9 percent versus 2.1 percent). These benefits will continue well beyond 2040, with the net benefits of the program continuing to grow.

The particular quantities and dates generated by these estimates should not be taken too seriously, since they depend on strong assumptions, but the overall pattern of outcomes makes sense. In purely economic terms, a program of investment in higher education imposes net costs on the economy in the near term—costs that can be financed by government or private borrowing or by higher taxes. But as the education level of the workforce rises, so do earnings and output. After a number of years, the economy is more productive, and employment and GDP are larger than they would have been without the investment—large enough, in fact, to pay off the earlier borrowing or provide sufficient income to pay for the higher taxes.

This time pattern is familiar from physical infrastructure investments, that is, an upfront period of costly investment followed by a lengthy period of economic benefit. For example, the building of the Interstate Highway System in the 1950s and 1960s imposed considerable costs on the American economy as well as creating significant disruptions and dislocations during the construction period. But over time, as the system neared completion and then continued to be productive, the speed and reliability of travel both by car and very importantly by truck increased substantially, yielding economic benefits that far outweighed the costs. We can expect to see the same pattern again should we embark on new infrastructure programs like repairing the nation’s bridges, improving urban transit systems, or combatting global warming through developing cleaner energy sources. And education investments are among the longest lasting in economic terms. A student taking a few years out of the workforce to earn a degree will typically receive an earnings benefit (and the economy will receive a productivity boost) that will continue for thirty or forty years—longer than most bridges or highways last.

Michael S. McPherson
Co-chair, Commission on the Future of Undergraduate Education
American Academy of Arts and Sciences


1. For example, a recent economic analysis on effective strategies to increase college enrollment and completion rates finds that increasing institutional spending has a greater effect on enrollment and completion than cutting student tuition. See David J. Deming and Christopher R. Walters, The Impact of Price Caps and Spending Cuts on U.S. Postsecondary Attainment, August 2017;

2. To learn more about the American Academy of Arts and Sciences’ Commission on the Future of Undergraduate Education, a multi-year project generously funded by Carnegie Corporation of New York, please visit