The Impact of Expenditures and Financial Aid on Racial Gaps in Institutional Graduation Rates in the U.S.

Abstract

There is a persistent gap in institutional-level graduation rates between U.S. Whites and underrepresented minorities (URM). This gap remains as graduation rates have increased for both Whites and URM. We tested whether these six-year graduation rate gaps among incoming undergraduate freshman cohorts were a function of institutional expenditures and financial aid. Our results were mixed. The gaps were much wider at institutions that spent more on academic and student services and who enrolled cohorts with higher average student loan amounts. Yet, these gaps between Whites and URM narrowed at institutions where students had larger average institutional and state/local grants. Our discussion centered on the changing financial context of higher education and the contributing roles of capital and institutional racial climate.