Determinants of Graduation Rates of Historically Black Colleges and Universities

(ProQuest: . denotes formulae omitted.)INTRODUCTIONThe college wage premium increased substantially in the 1980s. Consequently, the college enrollment rate grew rapidly in the past 30 years for all racial groups (Digest of Education Statistics 2009, Table 201). The college enrollment rate of recent high school completers for African Americans rose from 42.7% in 1980 to 55.7% in 2008. Recent high school completers are defined as individuals who obtained a high school diploma or completed a GED in the past 12 months. It has been well documented that Historically Black Colleges and Universities (HBCUs) play a crucial role in providing higher education for African Americans. Among black students enrolled in 4-year institutions, 21.3% of them attend HBCUs. HBCUs produce 21.5% of the Bachelor's degrees conferred to African Americans (Provasnik & Shafer, 2004). However, it was reported that the 6-year graduation rate for 83 federal designated 4-year HBCUs is only 37%, 4% lower than the national college graduation rate for black students (Stripling 2010). The role of HBCUs in providing higher education for African Americans has been challenged. It is critical to know what factors determine the graduation rates of HBCUs.This paper uses institutional data from College Results Online to test the effects of college quality, college cost and financial aid, student characteristics and local labor market on the completion rates of HBCUs. We find that college quality and college cost are the important factors influencing graduation rate of HBCUs. College quality has a positive effect, college cost has a negative effect, and financial aid has a positive effect on HBCU graduation rate. Improving the quality and reducing the net price of college education are among the effective measures to improve the graduation rate of HBCUs.LITERATURE REVIEWStudies in college choice assume that agents are rational in the sense that they make decisions to maximize the expected life-time utility of wealth given their borrowing constraints. Most studies on college choice assume the college attendance decision to be a static process, in which people make a once-and-for-all choice on college attendance at a point of time after they complete high school. (Christensen, Melder & Weibrod, 1975) find students' ability and the socioeconomic variables (education of mother, education of father, occupation of father and family income) have positive effect on college attendance. With controls for selection bias, (Willis & Rosen, 1979) find expected gains of lifetime earnings from education affect college choices. (Gustman & Steinmeier, 1981) show that wage and youth unemployment rate affect college choices. (Fuller, Manski & Wise, 1982) and (Manski & Wise, 1983) find schooling cost, foregone earnings and individual academic ability relative to the academic standards of a college are the factors affecting college choices. By examining the college enrollment behavior of two age cohorts, (Corman, 1983) confirms that the cost of higher education (tuition and the density of postsecondary institutions), family income, and unemployment rate are important factors influencing college attendance. Altonji (1993) finds that academic ability, family background and high school curriculum influence the ex-ante return to college. Besides emphasizing the importance of socioeconomic background, academic ability, the price of college education and unemployment rate in influencing the choice of two-year college vs. four-year college, (Rouse, 1994) adds return to college into the multinomial probit model of college attendance, and finds a positive effect of return to college on college attendance. (Card & Lemieux, 2000) study the slowdown of educational attainment in the 1970s. They find that tuition cost and local unemployment rate affect college enrollment decisions. They also find that cohort size has a negative effect on educational attainment and the return to college education positively affect college enrollment and college completion. …