College dropouts cost themselves, and Nevada, millions of dollars in earning potential

By Paul Takahashi

Tuesday, Aug. 23, 2011 | 2 a.m.

A new report that crunches the numbers on the missed earning potential of college dropouts says failing to graduate results in millions of dollars in lost income and tax revenue that could have helped spur economic redevelopment in Nevada and across the country.

Nevada’s college dropout rate is among the highest in the U.S., the report says.

College dropouts in the Silver State miss out on an estimated $11.7 million in lost income each year, according to the report released Monday by the American Institutes for Research, a Washington-based nonprofit, nonpartisan research group.

Over the average 40-year work life, lost income by Nevada’s college dropouts adds up to an estimated $618 million, which translates to about $133 million in lost federal tax revenue.

Since Nevada does not collect state income tax, the state is not directly affected by its college dropout rate. However, Nevada is losing out on higher property and sales tax revenues that were not calculated in the report, according to American Institutes for Research Vice President Mark Schneider.

“This research shows what we lose when students don’t reap the economic benefits of higher education and higher salaries,” said Schneider, who cowrote the report with researcher Lu Michelle Yin.

Nationwide, the report estimates that of the 1.1 million students entering 1,700 four-year colleges in the fall of 2002, nearly half of them failed to graduate within six years. As a result, about $3.8 billion was lost in income as well as about $730 million in federal and state income taxes nationwide.

Nevada’s lost income and tax revenue were among the lowest in the 50 states; however, the state has some of the lowest college graduation rates in the country, Schneider said. UNLV has a six-year graduation rate of 40 percent; UNR is only marginally better at about 50 percent, he said.

“You’ve got a graduation problem,” Schneider said of Nevada. “It’s not esoteric. You’re losing out on economic development.”

From 2002 to 2009, there were 1,436 student dropouts from UNLV, according to the report. Over one year, these UNLV students lost $6.1 million in wages, and would have paid about $920,000 in federal income taxes. The report found that over the average 40-year work life, the same students missed out on $325 million in income, and would have contributed $70 million in federal income taxes.

The American Institutes for Research’s latest report doesn’t take into account how much states spend to educate students who eventually drop out of college. The group’s October 2010 report found that Nevada spent about $68 million from 2003 to 2008 on students who dropped out after one year of college.