Meet the Author

Jonathan James |

Author

Jonathan James

Jonathan James is a former research economist in the Research Department.

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Meet the Author

Christopher Vecchio |

Research Analyst

Christopher Vecchio

Christopher Vecchio is a research analyst in the Research Department of the Federal Reserve Bank of Cleveland. His primary interests include development economics, international economics, and the economics of terrorism.

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03.07.13

Economic Trends

Improvements in High School Graduation Rates

Jonathan James and Christopher Vecchio

In January the Department of Education reported more positive news on one of the key indicators of the health of public high schools. During the 2009–2010 academic year (the most recent year for which national figures are computed), the estimated average freshman graduation rate (AFGR) reached a 40-year high of 78.2 percent. This is up 2.7 points from 75.5 percent during 2008–2009. While this is welcome news, the big picture remains that the dropout situation in many public high schools persists at epidemic levels, leaving plenty of room for future progress.

Importantly, the recent progress is part of a decade-long trend in improving graduation rates. The trend is due in part to the No Child Left Behind Act, passed in the early 2000s, which began forcing states to better measure and improve their graduation rates. These efforts, along with others, have resulted in substantial progress, taking the AFGR from nearly all-time lows in the late 1990s to nearly all-time highs in the current release.

Breaking down these trends by race and ethnicity shows that while all groups saw improvements on average, the greatest gains were attributed to groups with historically low on-time graduation rates. The AFGR for Hispanic students was up nearly 8 percentage points from two years earlier, and the estimated graduation rate for black students was up nearly 5 percentage points over the same period. White students experienced the smallest gains, 2 percentage points from two years earlier.

An important question that remains is whether we can expect these trends in the graduation rate to continue. Part of the answer to this question will depend on the effect of future changes in how the graduation rate is measured. A major challenge in the past has been that each state used a different method to measure high school graduation rates. This made comparing graduation rates across states, as well as constructing a national rate, very difficult. As states continued to construct their own graduation rates, in 2001 the Department of Education began using the AFGR as a benchmark measure of the high school graduation rate. It was considered the most reliable estimate given the available data reported by each individual state, and it could also be computed all the way back to the late 1960s.

However, beginning in the 2010–2011 academic year, all state education agencies will now be required to report graduation rates based on a more rigorous and uniform standard. The measurement is defined as the adjusted cohort graduation rate (ACGR), and it is designed to be a more accurate estimate of the on-time graduation rate than the AFGR. The goal of the ACGR is to fully track a cohort of ninth graders who are entering high school for the first time, adding and subtracting dropouts and transfers, and calculating the fraction earning a regular diploma after four years.

The Department of Education released preliminary data for the 2010–2011 academic year at the state level using this new measure. A comparison of the two measures for 2009–2010 illuminates two facts. First, on a national scale, the previous measure (the AFGR) is a fairly accurate estimate of the more refined measure. This is because on average, the AFGR is an overestimate of the graduation rate in some states and an underestimate in others, and these misestimates tend to offset each other. As a result, we would expect future national estimates under the new standard to be similar to current estimates and hopefully similar to current trends.

The second point however is that while the AFGR may be reliable on a national level, it may not provide a good estimate for any given state. Consequently, many states may experience large changes in their estimated graduation rates when they switch from the methods they used previously to the more rigorous ACGR. One example is Ohio. Prior to 2010 the state reported an estimate of the graduation rate based on its own adjusted-cohort formula. Between 2002 and 2009 this number was around 85 percent. However, in the 2010–2011 academic year, under the more accurate, uniform standard, the estimated on-time graduation rate is lower—78 percent.

Looking forward, an improved measure of the graduation rate will not only provide us with a more accurate picture of the dropout problem, it will also reveal the areas that are in most need of improvement. With such information, in conjunction with the trending improvements in graduation rates, we are hopefully positioned to continue to make substantial progress on one of the major challenges facing the education system.