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January 27, 2015

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

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.

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  1. You have to try and finish. I know it's difficult, I know it's expensive, I know sometimes other opportunities present themselves...but you have to strive to finish. Education is the backbone of escaping poverty. College, trade schools, etc. will provide the opportunity for greater earning potential.

    Don't even get me started on the people who drop out of high school, which is probably a much bigger problem than those that don't finish college.

  2. This could be true if not for the fact that there are not enough jobs to support the education level. Lawyers are coming out of UNLV law school and can't find employment. Dentists same thing. So all the extra income derived from these higher education students is fleeing the state anyway to where there is work. It doesn't take a $40,000 degree to shuffle cards or spin a ball. Nevada reaps what it sows, and that is a drop dead, stone dumb ignoramus. Sorry, but it's true!

  3. Other areas realize what their population is. "Trade Schools" have as high a regard as Community Colleges. We live in an area that has what 9 of the 10 largest hotels in the world, and another 10 that are only a few rooms off the mark. We have neighborhoods that offer more rooms and convention space than most cities in the world..we have a 24/7 economy, and look at the average age of those who graduate and put that age against other colleges. People can work here, in a good economy, make a good living without a college degree...but now, with the employment situation we have, those with a degree are more likely to be hired, for less money than used to be, but, this does not seem to be the end this article is trying to push.

  4. College is a business just like any other business. This article is a advertisement for that business.
    Students spending and getting into incredible debt at a very young age with no industry to hire them upon graduation except in slavery to the gambling industry does not motivate. Many who do graduate leave the state immediately for other states, and now foreign countries, who hire people for real jobs. Jobs that were once American jobs. I know I am talking into the wind by stating something so obvious to everyone but apparently the idea still hasn't reached our statehouse or D.C.. I have strong doubt it ever will.

  5. It seems like too many people are still missing the point of how a high degree of college graduates actually help a state.
    Lawyers and dentists don't diversify an economy; they create a couple of jobs. Scientists, Technologists, Engineers and Mathematicians (STEM) do diversify an economy; they create entire industries around themselves. Nevada needs new industries that will drive entirely new workforce positions. The states with the lowest unemployment, highest wages and fastest economic recoveries all have populations where well over 20% of their citizens hold 4 year degrees in "STEM" programs. The fact that they can have and maintain these highly educated populaces is because of huge STATE government spending that began long before a return on investment was expected. They can tax their citizenry at a higher rate and produce huge government spending because their populaces are higher wage earners in a more diverse economy.

    Bragging about a high school graduate making $40k a year at a casino is short sighted when most people in diverse states are making $60k-$80k a year from the jobs a more well educated populace creates.

    One of the points that is trying to be made is that Nevada needs to invest in graduating more college students. However, the hard truth that no one wants to hear is that to do so we will have to invest more money into these systems along with investing a lot more labor into making sure the money is spent on getting students to graduation.
    Unfortunately, we're at a point in Nevada where the only people that can afford to make this investment right now are the casinos, mining and billionaire corporations; none of which are willing to and all of which have been actively fighting PR campaigns, through organizations like NPRI, to try and convince Nevadans that spending tax money on education is a waste. The bad news is Nevadans have bought the "education spending is a waste" fallacy for the most part.
    The saddest part is that if Nevadans force these corporations to invest now then future Nevadans can maintain the same strong educated economy by moving taxes from these corporations to other types of taxation.

  6. Continually jacking up tuition and fees in the face of dwindling scholarship money and more difficult student loan qualifications while eliminating majors doesn't exactly help this.

  7. Maybe a bit off topic but how about those folks who are on Millenium scholarships. If they drop out are they required to reimburse the state for their failure? And how about narrowing the focus of those scholarships to certain major fields that are in demand such as mathematics and engineering.

  8. We keep pushing folks to get a college degree but having that degree does not create a job which requires a degree. If you look at the past 40 or so years of job creation and predictions about types of jobs created in the US we seem to keep creating about 20-25% actually requiring a four year or more degree. The balance is about 20-25% requiring high school or less and 50-60% requiring technical, trades, apprenticeship or similar education. The latter jobs are what is changing. Fifty years ago many more jobs were created requiring minimal skills. Now, far fewer. Young people should be encouraged to get skill then add to that skill through continuing education.

  9. Totally absurd premise--it assumes that people, who dropout of college, would have or should have completed college.

    Dropouts are part of process---giving someone a degree who should not have one does not further economic development. It wastes precious resources on individuals who otherwise would make a choice to pursue other avenues in life--honest and decent pursuits. College is a choice adults make.

    College is great, but not for everyone.