The Cost of Student Attrition

By:  Bill Bradfield

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For the past several years, there has been considerable discussion about the financial worries of college and university financial officers. In fact, in July 2013 a Gallup Survey (https://www.insidehighered.com/news/survey/cfo-survey-reveals-doubts-about-financial-sustainability) sponsored by Inside Higher Education uncovered some astonishing facts.

  • The first was that 60% of responding CFO’s questioned the 10-year sustainability of their schools financial model.
  • The second was that 92% of CFO’s identified “retaining current students” as a key strategy to increase revenue.
  • The third was that, despite all the potential of online education, only 58% of the CFO’s saw it as a strategy for revenue enhancement.

There is a lot you can take from that survey. For me, it was a growing recognition by schools that your best prospects are your current customers. Private businesses have long recognized that retaining your existing customers is a sure path to financial success. When you lose an existing customer, you not only lose their revenue, but you also lose them as a future prospect for new or add-on revenue. In addition, the market takes notice and it can complicate new business development efforts.

I have long talked about proactive, preemptive and reactive approaches to student retention and student success. Many administrators express that cost constraints and lack of a measureable return on investment as inhibitors to addressing retention challenges. I have attempted to develop the beginning of an ROI rubric. The goal was to be able to calculate the total amount of tuition revenue that a school will forego in the future given its historic attrition rate. I based it on tuition and made no attempt to include pull through revenues like room, board, fees, alumni contributions, etc. The inputs are pretty basic and generally available in sources like IPEDS. They include: undergraduate FTE, 6-year graduation rate and base undergraduate tuition.

The results are compelling. For instance,

  • A public institution of 12,000 full time students with a 6-year graduation rate of 70% and tuition of $8,000/year has a “revenue at risk” value of nearly $15,000,000. And that’s annually!! If that institution could move the attrition needle just 5 points to 75%, it would generate nearly $2,500,000 for the school… annually!
  • A private institution of 7,000 full time students with a 6-year graduation rate of 80% and tuition of $35,000/year has a “revenue at risk” value of nearly $25,000,000. And that’s annually, as well!! If that institution could move the attrition needle just 5 points to 85%, it would generate nearly $7,000,000 for the school… annually.

So when asking yourself whether you can afford an intensive student retention program, maybe the right question is how can you not afford it? Now there is a path toward a measureable return on your investment.

If you would like numbers customized for your school, drop me an E-mail at bbradfield@greenwoodhall.com or call me at 330-461-3981.