top of page

The Economic Impact of College Fit - Part 1: Retention

There are many reasons you regularly hear the phrase "College Fit." Through my years in higher education, I've heard college fit commonly used as everything from a measure of student happiness to an institution that helps students to grow personally, socially, and academically. While both descriptions are apt, one overlooked aspect is how drastically college fit can affect a family financially.

In this three-part series, I will take you on an analytic deep-dive exploring the financial impact of three contributing factors in college fit: Retention Rate, 4-Year Graduation Rate, and Default Rate. Today's first installment will focus on retention; the percentage of entering first-year students that remain at their original institution at the start of their sophomore year.

As you'll discover throughout this series, the financial impact of transferring, extended undergraduate completion time frames, and defaulting on student loans can be significant, potentially altering a student's early career financial net worth by $100,000 or more!


Undoubtedly, there are many great colleges and universities throughout the United States and world; unfortunately, there are many more that struggle to meet acceptable standards. A quick review of retention rates highlights the great divide amongst four-year institutions.

The National Center for Education Statistics reports the average retention rate for first-time, full-time degree seeking students to be 81% for students starting in Fall 2019. Institutions meeting and exceeding this average can generally be counted on to create a supportive environment for student success, yet many other schools fall far short of reasonable expectations. The National Center for Education Statistics data also finds that over 35% of institutions report retention rates below 70%, while nearly 8% of institutions actually fall below 50% retention.

Can you imagine attending an institution where you know half or even a third of your classmates won't be on campus by the start of sophomore year? Chances are you are not going to see schools promoting those statistics in shiny brochures, so the burden falls on the student and their family to thoroughly research schools and make an informed enrollment decision.

While you may acknowledge the wide gulf amongst institutions in their ability to retain to students, many of you may still be questioning what type of impact transferring could really have on a student's overall financial outlook. After all, the phrases, "You could always transfer home" or "Transferring to School X would be a fallback option" are commonplace as students and families discuss their initial college decision. Over the remainder of the post, I'll share more about the financial impact of such a decision and highlight the importance of finding the right fit, the first time!


To enable us to estimate the cost of transferring, we must first establish the expected cost of college. According to College Board, the average comprehensive cost (tuition, fees, room, and board) for the 2021-22 academic year ranged from $22,690 (public four-year in-state) to $51,690 (private non-profit four-year).

Though the cost gap may seem significant between public and private institutions, private institutions tend to offer significantly more scholarships and grants, negating a large share of the gap. In fact, the National Center for Educational Statistics shows the average grant aid at private four-year institutions to be $23,800 compared to just $8,100 at public four-year institutions.

When factoring in grant aid (includes both scholarships and grants, but not student loans), the average net cost ranged from $14,590 (public four-year in-state) to $31,410 (public four-year out-of-state). Surprising to many people, the average net cost at private schools comes in lower than the average net cost for public out-of-state institutions.


Regardless of the type of institution a student chooses to attend, persisting at the institution a student begins their career will greatly curb the cost of a college degree. About Education cites a government study showing that students who stay at one institution will graduate in 51 months, on average, while students that attend two or more institutions will take, on average, between 59 and 67 months to graduate. Since a student will typically begin school in August and graduate in May (45 months for the traditional four-year graduation), students persisting at their original institution graduate in 4.5 years on average, while students that have transferred at least once will, on average, take one more year than their peers to complete their undergraduate degree.

Assuming, for now, similar graduation rates across all sectors (which isn't necessarily the case and will be addressed in The Economic Impact of College Fit - Part 2: 4-Year Graduation Rates), the cost of transferring can be calculated from the data already presented.

  • Total Cost = Graduation Time * (Comprehensive Yearly Cost - Yearly Grant Aid)

  • Cost of Transferring = Total Cost (Transfer) - Total Cost (No Transfer)

When calculated simply, the average cost of transferring institutions at least once ranges from $14,590 (public four-year in-state) to $31,410 (public four-year out-of-state), essentially the net cost of an additional year of college.

However, the calculations above do not even consider the yearly increase in tuition (typically 1-3%) or the fact that merit scholarships are typically offered for only the first four years of study, both factors which would moderately stretch the cost of transferring. More importantly, the calculation above fails to account for the disparity in scholarship opportunities for first-year freshmen versus transfer students.

Many institutions do not offer transfers any scholarship opportunities, while the schools that do, in most cases, will only award 30-70% of what a student would have been eligible for as an incoming freshman. Assuming a student transfers after their first year of college and their scholarship offer was cut in half for their remaining time in college, the cost of transferring escalates, now ranging from $32,815 (public four-year in-state) to $80,540 (private four-year).

While the average cost of transferring begins to mount, one other factor that has been overlooked thus far is the opportunity cost of an additional year pursuing an undergraduate degree. The National Association of College and Employers estimates that the starting median salary for those graduating in the Class of 2019 was $52,714. Add the opportunity cost of being employed to the accumulated cost of transferring and the overall average cost of transferring could stretch up to an astonishing $133,254!


Ultimately, a student should never select a college based solely on the retention rate of a particular institution or any other singular factor, but it should be something every family is aware of during the selection process. As mentioned earlier, but worth repeating, if an institution has a retention rate at or above 80%, typically a family can be confident the institution is providing good support in helping students navigate their freshman year and persist towards their degree. However, when considering an institution that falls below the national average, a student should be very diligent in their research and would be well served to ask pointed questions to ensure they aren't enrolling at an institution as a freshman, only to go down the costly road of transferring one year later. Certainly, there are success stories of students transferring, receiving comparable scholarship offers, and completing their degrees on schedule. One shouldn't perceive this post to be a condemnation against transferring, which in many cases is completely warranted, but rather an opportunity to raise awareness on the potential costs of transferring, while highlighting the importance of finding the right college fit initially!

Brian Nigg

President | The Collegiate Group


Featured Posts
Recent Posts
Search By Tags
Follow Us
  • Twitter
  • Instagram
  • Facebook Basic Black
  • LinkedIn Basic Black
bottom of page