No Free Lunch

Study says there is a simple way to increase (or decrease) graduation rates: increase (or decrease) state appropriations.
October 3, 2006

Few things get lawmakers or other critics of higher education going like low graduation rates. Parents want to feel that if they write four years (or five years...) of tuition checks, Johnny will have earned a degree. The Spellings Commission was but the latest to castigate colleges for their low graduation rates -- and the panel called for more information about graduation rates to be published, for more data to be collected, and for colleges to be held more accountable for their ability to get students in and out in reasonable amounts of time.

Accompanying all of this were plenty of suggestions that colleges with low graduation rates were wasting the taxpayers' and parents' money -- and lots of rhetoric attacking colleges for always asking for more money.

Given that the education secretary and her panel have frequently said they want more data to inform decisions, they may be interested in the findings of a University of Minnesota professor who recently examined a variety of factors about graduation rates at public four-year institutions. It turns out that there is a single variable that can predict whether graduation rates are going to increase or decrease: the pattern of state appropriations.

In "Does Public Funding for Higher Education Matter?" Liang Zhang, an assistant professor of higher education, answers with an emphatic Yes. The paper was just released by the Cornell Higher Education Research Institute, where Zhang is a faculty associate.

The results will not surprise leaders of public colleges, who have said for years that state appropriation levels affect all kinds of things that help or hinder prompt graduation: tuition rates, numbers of course sections, budgets for academic support services, use of adjuncts vs. tenure-track professors with office hours, etc. But when college officials make these points, they have frequently been told that while they think those are the factors, institutional efficiency might well be at play and money may not be the driving factor.

Individual institutions have looked at their data, of course, and there have been some broader studies. But Zhang writes that he designed his study to deal with criticisms of previous studies. For example, rather than studying tuition either at point of enrollment or after six years, he examined it during the first four years after enrollment. He also controlled for any number of factors: institution type, percentage of students with high SAT scores, percentage of students who live on campus, percentages of male, minority or disadvantaged students, percentages of full-time students.

While the starting and ending points for graduation rates differed for different groups, and the extent of the impact varied, Zhang found in his national sample that state appropriations trumped all factors and affected all groups and types of institutions. An increase of $1,000 in FTE state appropriation will result in a one percentage point increase in graduation rates. The report does not suggest that other factors aren't at play either (although many of the strategies public colleges use do in fact cost money). But it says that those who suggest that smart policies can turn things around without additional money don't have data to back them up.

Writes Zhang: "Simply put, there is no such thing as a free lunch when it comes to graduation rates at public higher education institutions."


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