College costs are rising, student debt is a major topic of debate, and graduation rates are increasingly used as a proxy for value. But here’s the uncomfortable question most families don’t ask soon enough: Do higher-priced colleges actually deliver better outcomes—or just higher bills?

In Who Graduates from College? Who Doesn’t?, I analyze how both student-level and institutional factors shape college completion. While academic preparation and enrollment intensity matter, the data reveals a consistent pattern: graduation rates tend to be higher at colleges with higher net prices, greater selectivity, and fewer low-income students.

Using data from the Integrated Postsecondary Education Data System (IPEDS), this analysis explores how net price, selectivity, and Pell Grant enrollment correlate with graduation outcomes and why these relationships say as much about who colleges enroll as about what colleges provide.

Graduation Rates Increase With College Costs

College graduation rates tend to be higher at more expensive institutions, despite the greater financial stress. In effect, you get what you pay for.

Net price refers to the discounted cost of college, after grants and scholarships are subtracted from the annual total college costs, including tuition, fees, housing, meals, books, supplies, equipment, transportation and miscellaneous personal expenses. The net price is the amount the students actually pay, after subtracting gift aid that does not need to be repaid.

This table shows that higher net price correlates with higher graduation rates. The graduation rates increase as the net price increases.

So long as a college is not engaged in graduation inflation, higher graduation rates yield pricing power because they deliver more value to the student. Colleges with higher graduation rates also tend to attract wealthier students, as a high net price presents an additional barrier to low-income students.

These colleges also have more resources to spend on improving student success. They spend more per student on instruction and tutoring services. They have lower student-faculty ratios, providing students with more face-time with the faculty and better advising. More resources are devoted to academic support than at other colleges.

Another key difference between colleges is in the quality of the fellow students. After all, students spend more time with their peers than they spend sitting inside a classroom listening to lectures. Better quality students yield better informal forms of support, improving outcomes.

Pell Grant Recipients Are Less Likely To Graduate

Pell Grants are a good proxy for low-income students. Pell Grant recipients are less likely to enroll at the most expensive colleges because the Pell Grants cover a smaller share of college costs. This is also a driver of undermatching at selective colleges.

Financial aid generally does not cover full college costs, even at the most generous colleges, so low-income students are more likely to run out of money to pay college bills. This forces them to drop out of college.

This chart shows that the graduation rate decreases as the percentage of students with Pell Grants at a college increases.

Graduation Rates Are Higher At Selective Colleges

College graduation rates tend to be higher at more most selective institutions, which admit a lower percentage of applicants. These colleges admit students who are more likely to graduate, such as students with better academic preparation, as evidenced by higher high school GPA and higher admissions test scores.

The high graduation rates are due more to the quality of the students than to the value added by the college. These students would do well at any college, regardless of the cost.

This table shows that selectivity correlates with graduation rates.

The graduation rate increases as the acceptance rate decreases. Colleges that admit less than a quarter of applicants graduate more than 90% of the students who enroll. Open admission colleges, which admit every student who applies, graduate only half of the students who enroll.


This table shows that students who enroll at private for-profit colleges are less likely to graduate than students at private non-profit colleges.

What This Means For Families

For families trying to make sense of college costs and outcomes, graduation rates can be a powerful signal.

A higher graduation rate often reflects who a college enrolls and can financially support the costs, not just the quality of teaching or student services. More expensive and selective colleges tend to serve students who arrive academically prepared and whose families are better positioned to absorb the costs. Those advantages make it easier to stay enrolled through graduation, even when challenges arise.

For low-income families, this reality creates a hidden risk. Colleges where Pell Grant recipients make up a larger share of enrollment often have lower graduation rates - not because students are less capable, but because financial aid frequently falls short of covering the full cost of attendance. When money runs out, persistence becomes impossible, regardless of motivation or ability.

The takeaway is not that families should automatically choose the most expensive or selective college they can access. Instead, families should look beyond sticker price and rankings and ask harder, more practical questions:

• Can we realistically afford all four (or more) years without borrowing unsustainably?
• How much academic and financial support does the college provide after the first year?
• What percentage of students like us actually make it to graduation?

College value is not just about getting in - it’s about getting out with a degree. For families, the safest path is often not the lowest price or the highest prestige, but the institution that offers a financially viable route to completion.

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