As in any venture, there is a cost related to loss. But this cost is rather complex and is manifested in a variety of ways. First, we will discuss the “cost” of student attrition with respect to the institution, the individual, and to society. These are each different and are perceived differently within each category. Second, we will discuss of student attri-tion/retention on an institutional basis, or as a system wide issue (e.g., if the student leaves institution A but enrolls and persists at institution B, is that really a bad thing?). And third, we will discuss student retention in more precise terms of efficiency, which begs identification of direct, indirect, and opportunity costs.

The bottom line—which we hope to achieve in this workshop—is that the cost of prevention attrition (when it can be prevented) easily outweighs the costs of status quo (or doing noth-ing). This is an important statement that is lost on many administrators. And secondly, an institution must be willing to spend money (or redirect) to save or earn money. If we can get past these two statements, we’re half the way to success.

We begin with a brief discussion of institutional costs.

Institutional Costs
We can consider the costs associated with student attrition in a number of ways with re-gard to the institution. However, we must make an assumption before we do this, based on the ability of an institution to vary its number of seats or students. These institutions play in a market where supply and demand has an effect that can be measured in financial terms. If an institution has market flexibility, then the impact of attrition/retention is much greater than on institutions that have a fixed number of seats and tend to fill all seats re-gardless of what they do. Still, all institutions in all situations can become more efficient and save money through better programming for students.

The Market-Sensitive Institution
Let us consider the market-sensitive institution. The common logic regarding the cost of losing students is simply stated that an institution reduces its income when a student leaves. This can be considered on a given year or a degree-basis. For instance, if a student leaves after the freshman year, the institution can calculate the loss of that student by multiplying the lost tuition charges for subsequent years to degree. If tuition is $5,000 per year, a freshman dropout would relate to a net loss of $15,000 for a four-year degree pro-gram (without inflationary considerations). This is a gross characterization, but almost all retention cost calculations are somewhat limited in nature. Also, please note that this not consider the issue of general subsidies to students or institutions from state or federal agencies.

It is also argued that an institution loses on ancillary revenues—those that come from stu-dents living on or relating to the campus. These would include bookstore revenues, on-campus restaurants and entertainment, residence hall fees, and even lost financial aid revenue. There is also a loss to local establishments that benefit from students. We will talk later of additional losses in potential revenue.

Remember, this discussion is based on institutions that have flexible enrolment targets. If an institution can increase their enrolment, then they have a more direct interest in serving as many students as possible. Thus, a “loss” in the system is a loss in net revenue. This mostly occurs at the private university, but it is becoming more common at publicly-funded institutions.

The Restricted-Enrolment Institution
For institutions with limits on the number of seats or students they can serve, the calcula-tion of cost is somewhat different than that just presented. For these institutions, supply isn’t an issue because demand often far outpaces supply, usually due to either a financial or governmental issue. There are more than enough students who want to get in to Institu-tion A, so the loss of a student in out years (those after the student leaves) is a non-starter because there will be a replacement to fill that seat .

Note that most retention organizations and researchers don’t discuss this issue, but the efforts of institu-tions with enrolment ceilings covers most institutions in the US and Canada.

While institutions in our first profile—those that have flexible enrolments—have out-year costs to consider, restricted-enrolment institutions lose their revenues in the year that the student drops out. For consideration, if a freshman student leaves after completion of the first semester, the institution often loses out on (a) the revenues of that student in the sec-ond semester; and (b) the revenues of an additional student to fill that student in the second semester. POINT: the institution loses. If the student leaves six weeks into the first semester, the cost is even larger (also remember those ancillary revenues).

General Costs
Another way of calculating net cost of attrition, for either market-based institutions or re-stricted enrolment institution, is by conducting an analysis of the money spent on recruitment and enrolment services. Given that Institution A spends X dollars on recruit-ment and enrolment services during the year (which include staffing, outreach, and overhead expenses), the institution loses a percentage of those funds when a student leaves due to inefficiency. For example, if Institution A spends $500,000 a year on staffing and other expenses in the recruitment and enrolment area of the institution, and 30 per-cent of the freshman students fail to return for the sophomore year, then the institution loses $150,000 each year on inefficiency. Of course, this is a theoretical argument that assumes an institution could retain 100 percent of students (NOTE: some of our Ivy League institutions retain 98 percent of their students). But, for arguments sake, let’s assume that public institutions could retain, at most, 90 percent of their students. Then, a 30 year attri-tion rate would actually connote to a 20 percent lose, not a 30 percent loss. Still, 20 percent of $500,000 is still $100,000—enough funds for one or two FTE staff members.

If your institution is even larger, let’s say, such that the recruitment and enrolment budgets averages $2 million each year, this 20 percent net attrition rate costs the institution $400,000 each year. A lot of money in any terms.

Other Costs
Previously we discussed the loss of revenue from bookstore, on-campus restaurants and services, etc. In addition, institutions potentially lose future revenue from students who don’t earn a degree from the institution. Alumni giving is an important financial stream for institution, but typically only those who receive a degree give back to their institution. For some reason, dropouts aren’t quite as enamored with their alma mater as completers. Go figure.

Other researchers (Robbins, 2003) also describe costs of attrition in terms of bad PR about the institution (which can effect the supply side of the argument) and internal morale is-sues (students understand that high-attrition institutions aren’t upper tier, and begin to view themselves that way).

Individual Cost
Students who enroll in an institution and choose to leave before graduation fall into sev-eral categories. First are those that transfer to other institutions, either due to financial issues or the awaking of their “true goals” in life. This begs of the discussion of institutional versus systemic loss. For the institution, this is clearly a loss in revenue. However, systemi-cally, it becomes a zero-sum game, because that student may pay the same amount at another institution. True, there is a loss of systemic revenue if that student enrolls at a community college after attending a four-year institution, but that argument can be ne-gated if we also discuss subsidy.

For other students, we can begin to credit individual cost with other, more tangible issues, such as the obvious costs associated with time spent on activities that do not necessarily move them forward in terms of career development. If a partial education fails to get stu-dents further in life, both socially and economically, then the time spent in these activities can be calculated in lost investment in terms of tuition, fees, plus the opportunity costs of lost wages. These are real costs that are justifiable.

Societal Cost
The cost to society can be calculated in several ways. First is the cost in terms of postsec-ondary investment. Every student in a public institution is subsidized by taxpayers. In fact, the tuition and fee charges to students/families represent only 27 percent (approximate) of the total cost of education. The reminder comes primarily from state governments. Addi-tional support comes from the federal government in the form of subsidized grants and loans.

Societal cost may also be measured in other public subsidies, such as social services. For example, students who do not complete a college education are more likely to require so-cial services—welfare, incarceration—than other students. This is not to say that individuals who leave postsecondary education face these challenges, but on average, the data sup-port the conclusion that public funding is used to support those who either never go to college or fail to complete college.

Of course, the cost to society can be discussed in a larger perspective. For every student that dropouts of college, society-at-large loses an opportunity to excel or contribute at the higher echelon of business and trade. Global markets demand higher skills and education, and students that dropout of college leave a gap that is not necessarily filled by domestic students.