NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Non-Instructional Expenditures Affect Graduation Rates

An increase in spending on student services of $500 per student was correlated with an increase in graduation rates of 1.7 percent.

In new research, Douglas Webber and Ronald Ehrenberg find that institutions of higher education serving low-income students with relatively lower entrance exam scores may be able to increase their six-year graduation rates by spending more on student services, including admissions, registrar activities, tutoring programs, intramurals, and student organizations. By comparison, spending more on instructional activities, research, or academic support activities is associated with a smaller effect on graduation rates, particularly at institutions where students have relatively low graduation rates. As a result, at these institutions, a reallocation of some funds from instruction to student service may lead to an increase in graduation rates.

In Do Expenditures Other than Instructional Expenditures Affect Graduation and Persistence Rates in American Higher Education? (NBER Working Paper No. 15216), the researchers use data from the Delta Cost Project, a sample of over one thousand four-year colleges and universities in the United States, covering the academic years 2002-3 and 2005-6. In the sample, average instructional expenditures were $9,689 per full-time equivalent student (FTE); average academic support expenditures were $2,456 per FTE; average student support expenditures were $2,779 per FTE; and average research expenditures were $2,682 per FTE. However, there were wide variations in the sample: mean instructional spending at higher SAT schools was twice as high as at lower SAT schools, and mean research spending at higher SAT schools was almost six times the research spending at lower SAT schools.

At the lower SAT schools -- those with a median SAT of 973 and six-year graduation rates of 55 percent – an increase in per-student spending on student services of $500 was correlated with an increase in graduation rates of 1.7 percent. At the higher SAT schools -- where the median SAT was 1162 and the six-year graduation rate was 65 percent – an additional $500 on student services was associated with an increase in graduation rates of only 0.3 percent.

The authors find similar results when they classify schools by the average dollars received per student through Pell Grants, a federal program that provides need-based grants to low-income students. At schools receiving Pell Grant expenditures averaging $1,103 per student, an increase of $500 in student services spending will increase graduation rates by 1.1 percent. At institutions whose average Pell Grants are only $464 per student, higher spending on student services is associated with a much smaller effect – an increase in the six-year graduation rate of just 0.2 percent.

-- Linda Gorman

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