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Government reporting and the funding mechanisms for higher education have been through a transformation from “complete input based systems to the adaption of more competitive outcome based approaches” (Alexander, 2000, p.2), and government interest in performance funding and budgeting for higher education has substantially increased in OECD nations (Alexander, 2000; Brennan, 1999; Schmidtlein, 1999). Political leaders in these countries have realized that to strengthen the competitiveness of their constituents they must increase their involvement in the development of human capital, specifically in higher education (Alexander, 2000). This economic motivation is energizing states to reassess their relationships with higher education, pressuring institutions to become more accountable, more efficient and more productive in the use of publicly generated resources (Alexander, 2000). Thus, accountability in college education has become a focal point of public debate (Alexander, 2000; Bailey et al., 2006; Huisman & Currie, 2004; Keams, 1998; Elton, 1998; Kitagawa, 2003; Dill, 1999). Further, in Western Europe student enrollment in higher education has risen by approximately 1/3 since the early 1980s, but expenditure as a percentage of the national GDP per capita declined during the same period (Alexander, 2000). More recently in the United States, states cut public funding 20% on average over the past five years and forty-seven out of 50 states were spending less per student in the 2014/15 school year than they did at the start of the recession (Mitchell & Leachman, 2015).
While measures of learning outcome have been used extensively for accreditation purposes, retention and graduation rates are considered key performance indicators by college administrators (Talbert, 2012; Lau, 2003; Astin, 1997). Retention and graduation rates have been implemented in some states’ laws to assess institutional effectiveness (Jakiel, 2011) and have been used in national and international rankings for some time. There are many arguments in favor of using graduation rates as a metric to evaluate colleges. According to the U.S. Labor Statistics published for 2014 (Mayer-Schonberger & Cukier, 2014), a student who graduates with a bachelor’s degree earns on average 1.4 times more and has a 2.5 percentage point lower unemployment rate than a student who drops out of college. Low graduation rates affect both the students who pay tuition longer than necessary and thus could earn money instead and society as a whole, which funds public universities through taxes. While most college curricula for a bachelor’s degree are designed to be completed in four years, less than 31.9% of all students graduated within four years at public universities in the United States according to the latest published statistics (ACT, 2014). According to these statistics, the six-year graduation rate at public colleges in the US was 56% in 2014. Using graduation rates as a metric may be open to critique when used to compare universities because they do not differentiate between different types of students. For instance, urban universities often have non-traditional students who take classes while holding down a job. Nevertheless, graduation rates are widely used as a performance metric of colleges and have been included as a key metric in the college scorecard by the Department of Education (USDOE).