Colleges that serve large minority populations sometimes appear to have low graduation rates.

But a new report from the liberal Center for American Progress points out that what they really have are sparser resources. Where resources are up, so are graduation rates.

Why this matters

American classrooms are becoming more diverse, with non-white children making up half of all public school students. In the coming years, these kids will graduate from high school and seek admission to colleges and universities.

That’s a positive thing since higher education is now widely viewed as an economic necessity. At the moment, though, schools that disproportionately educate communities of color — called minority-serving institutions, or MSIs, in the education world — struggle more financially and in terms of graduation rates than traditional colleges.

That’s part of the reason economic inequality continues to grip the United States, the report says. And as a more diverse cohort of young people seek higher education in the coming years, the number of schools who fall into the minority-serving category will continue to rise.

The schools can play an important role in offering a path to college and to higher earnings later on, according to the report, but they need the support and resources to be able to help combat income inequality and educational gaps.

The revenue problem

Right now, public institutions serving minorities cost less on average than traditional schools, and offer a more affordable option for low-income families. But lower cost can mean less revenue for the schools, which can make it difficult to provide high-quality programs.

That’s the case for community colleges that serve minority students. They received a median of $1,515 in tuition and fee revenue per year for full-time students, while other community colleges got $2,376. But public four-year colleges that serve minority students actually got more than other public colleges, a median of $6,205 per student compared to $5,109.

What happens when those resources increase?

One thing that happens is graduation rates go up. The report points out that in 2012, the graduation rate for community colleges serving minority students was 27 percent below other community colleges. But the graduation rate for public four-year colleges serving minority students was almost 10 percent higher than for other public four-year colleges. The rates for historically black colleges were 30 percent higher. One reason, the report says, is that historically black colleges have received significant funding from the government over the last several decades.

“These investments have resulted in some MSIs—particularly four-year colleges and universities—receiving significantly more funding from government grants and contracts,” the report says, “which helps them achieve better graduation rates.”

That’s not to say that there couldn’t be other factors besides resources influencing how many people walk across the stage each year – professors and academic approach likely have an impact, too.

Why invest in MSIs?

The economy could grow, according to the report. The report found that if the country had managed to close racial and ethnic gaps in 2011, average income would be up more than eight percent, GDP would have increased $1.2 trillion, and federal, state and local tax revenues would have seen an additional $192 billion.

“If the nation’s higher-education system is to improve,” notes the report, “these institutions must be given the resources and tools necessary to improve.”

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