Taking six years to get a four-year college degree can cost students up to almost $300,000 in tuition, interest on loans, and forgone income and retirement savings, according to a new study from NerdWallet.
Only 40% of college students receive a bachelor’s degree in four years, according to the National Center for Education Statistics. Within six years, 60% of bachelor’s degree seekers will receive a diploma.
Those who take out student loans will have a much bigger college debt to pay off if they need more than four years to earn a bachelor’s degree. In addition, taking one or two “victory laps,” as some students jokingly call extra years, can stunt lifelong retirement savings. NerdWallet’s research shows that students who take six years to obtain a bachelor’s degree could miss out on more than $150,000 in retirement savings compounded over 45 years.
Tuition and loan costs
To find out just how much an extended bachelor’s degree is costing students, we looked at a student cohort that began college in 2008 and was set to graduate in 2012 but instead finished in five years or six years, using data provided by the National Association of Colleges and Employers.
We started with the average out-of-pocket tuition costs at public and not-for-profit private colleges, as well as the costs of student loans to be paid back at an annual interest rate of 4.9% over the standard 10-year repayment period, to determine the total cost of taking one and two additional years to graduate with a bachelor’s degree. All amounts are adjusted for inflation to reflect 2016 values.
Here’s what we found:
|Tuition and loan costs||One |
|Two extra years,|
|Two extra years,
|Portion of tuition paid out of pocket||$12,557||$18,992||$25,375||$38,115|
|Cost of a loan, with interest, over 10 years||$6,040||$7,823||$12,080||$15,645|
We also factored in the opportunity costs of forgone entry-level income and compounded retirement savings. We did not include additional out-of-pocket costs such as rent, household expenses or personal bills. Here’s what we found:
We looked at the average starting salary for the class of 2013, using data from the NACE and adjusted for inflation. We found a student would miss out on $46,355 in income by taking five years to graduate. A student who took six years to graduate would forgo $94,353, assuming wage growth of 4% in the second year of employment.
Reduced retirement savings
Forgone income may be a loss, but retirement savings get hit even harder. We assumed graduates would direct 7.1% of their income into a retirement plan, the average contribution rate for people under 25, according to the Bureau of Labor Statistics. We then compounded those savings over 45 years based on a standard 7% annual return to determine the lifetime savings a student would forgo.
We found that students who graduate in five years would miss out on $82,074 in lifetime retirement savings, and six-year graduates would fail to gain up to $150,882.
Opportunity costs for 'victory laps'
|One extra year, public college||One extra year, private college||Two extra years,|
|Two extra years,
|Retirement savings missed opportunity||$82,074||$82,074||$150,882||$150,882|
|Total opportunity cost||$128,429||$128,429||$245,235||$245,235|
Total 'victory lap' costs
|One extra year, public college||One extra year, private college||Two extra years, public college||Two extra years, private college|
|Tuition and loans||$18,598||$26,815||$37,456||$53,760|
|Total cost for not graduating in four years||$147,026||$155,244||$282,691||$298,995|
What’s taking students so long to graduate?
Students take longer than four years to graduate for many reasons, experts say. These include:
Losing credits by transferring: More than one-third of undergraduate students will transfer at least once within six years, according to a 2015 study by the National Student Clearinghouse Research Center. During this transition, students lose about 13 credits on average, equaling approximately one semester, according to a 2014 report by the National Center for Education Statistics. For 39% of transfer students, no credits will carry over from one institution to the next.
Enrolling in unnecessary courses: Students may take too many courses that are outside their major and don’t count toward graduation. On average, graduates accumulate 134 credits when only 120 credits are required for most bachelor’s degrees, according to a 2014 report by Complete College America, a nonprofit group in Indianapolis that aims to increase the number of Americans with degrees.
Taking too few credits per semester: Nearly three-quarters of college students are not enrolled in schedules that lead to on-time graduation, according to a 2013 policy brief commissioned by Complete College America. Only 50% of students at four-year institutions are taking the 15 or more credit hours per semester that they would need to graduate on time, according to Complete College America.
Income disparities and graduation rates
There’s a gap in completion rates between low-income students and their higher-income counterparts. Only 14% of students of low socioeconomic status received a bachelor’s or higher degree within eight years of high school graduation, compared with 29% of middle socioeconomic status students and 60% of high socioeconomic status students, according to the National Center for Educational Statistics. Socioeconomic status, as determined by the government, is based on a mix of factors including individual or family income, educational attainment and occupation.
The lower completion rates for students of low socioeconomic status reflect additional financial challenges the group faces in getting an education. Students who must work while attending school may have difficulty keeping up with the course load they need to graduate on time, experts say. Approximately 40% of undergraduates work at least 30 hours a week, according to a 2015 study from Georgetown University Center on Education and the Workforce.
To promote higher rates of on-time four-year graduation, colleges must do more for students with financial need who have to work part time or full time while attending classes, says Lisa Suzuki, director of Counseling@NYU, an online master’s degree program for counseling and guidance at New York University, and an associate professor of applied psychology at NYU Steinhardt.
“College, for many, is an expensive endeavor, so many students have to work full time, but when they work full time they aren’t necessarily going to be able to go to school full time,” Suzuki says. “They still need to get financial aid, and they don’t get as much if they go [to school] part time. It becomes a cyclical problem.”
Colleges can support struggling students by increasing financial help for part-time study, offering courses on weekends and evenings so students can work full time, and offering a wider selection of online courses, she adds.
How colleges, policymakers are responding
Schools with the best graduation rates tend to promote individual attention, a strong advising approach and a curriculum that encourages four-year completion, and they outline the availability of financial aid for all four years.
Some colleges and universities are creating initiatives to promote 15-credit enrollment per semester to ensure students graduate in four years. Portland State University in Portland, Oregon, for example, guarantees four-year completion for all students who agree to take 15 credits per term of required degree courses, or the student won’t have to pay tuition for any remaining courses needed to graduate.
Flat tuition rates are offered at the University of Oklahoma in Norman, Oklahoma; Metropolitan State University of Denver in Colorado; and the entire Montana University System. With flat rates, all full-time students — those who take at least 12 credit hours per semester — pay the same tuition. This allows students to take the 15 credits per semester they need to graduate in four years without incurring additional costs. Many schools charge per credit hour, which means students who take 15 credit hours pay more than those who take only 12.
Some schools with lower four-year completion rates are working to hire or expand advisement departments. On average, just one advisor is available to every 400 students at colleges nationwide, according to Complete College America. At schools with lower four-year completion rates, more advisors are critical to increasing on-time graduation, experts say.
“Many places have advisor-to-student ratios of 1 to 1,000 or 1 to 500, and that kind of ratio doesn’t do anybody much good,” says Richard D. Sluder, vice provost for student success at Middle Tennessee State in Murfreesboro, Tennessee.
Middle Tennessee State is working to raise its four-year completion rate of 20% with its Student Success Advantage program, which includes hiring 47 new academic advisors to bring the ratio of advisors to students to 1:240.
The university expanded eligibility for scholarships, added new advising software and provided incentives for students for taking at least 15 credit hours per semester. Students who have 105 hours completed by the end of their seventh semester will be on track to finish in four years and will receive a scholarship amount equivalent to the tuition increases since their freshman year. Once the new system was in place, the percentage of freshman taking 15 credit hours went from 73% in 2014 to 80% in 2015.
At schools with the highest four-year completion rates, six-year schooling is a rarity. “Everyone gets out in four years, and I think it’s largely because the curriculum is set up for that,” says Travis Brown, director of the Quantitative Skills Center at Pomona College in Claremont, California. “The expectation is that you have four years to make this work.”
At Pomona, a highly selective liberal arts college, the four-year completion rate is 90% among its 1,650 students. One reason for Pomona’s high completion rates, Brown says, is its financing structure. The college has a generous need-based financial aid program that awards more than $30 million each year to meet what it says is “100%” of each student’s demonstrated need.
Victoria Simons is a data associate at NerdWallet, a personal finance website. Email: email@example.com. Anna Helhoski is a staff writer at NerdWallet. Email: firstname.lastname@example.org. Twitter: @AnnaHelhoski.