More than a quarter of American students are dropping out after their first year in college, many apparently because they cannot keep up with rising tuition costs.

A survey of 2,564 colleges by American College Testing showed that 37 per cent of first-year students failed to return for a second year, the highest rate since the testing service started keeping track in 1983. It also put the university and college graduation rate at its lowest level in a decade.

"Because of (federal) budget cuts last year, thousands of students weren't able to get financial aid," said Kazim Ali, president of the United States Student Association. "It's an extremely serious problem, and it's going to get even worse three or four years down the road."

Mr Ali said the percentage of black and hispanic students who could not afford to stay in college is probably two or three times as high as the national average, though no independent statistics are available.

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More high-school graduates are going to college, but many cannot afford to stay and have to leave at least temporarily, educators say. Others are being lured away by the increasing number of new jobs available as the economy improves, although they may plan to return to school eventually.

At least two-thirds of students now take longer than the traditional four years to graduate from an American college with a bachelor's degree.

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"The four-year bachelor's degree is a thing out of history. We're now seeing six or seven-year bachelor's degrees," Mr Ali said. "While the cost of education rises and tuition rises and there are inflationary increases for things like books and room and board, you don't see financial aid going up commensurate with that."

Meanwhile, a smaller and smaller proportion of students are graduating. Only 53 per cent of four-year college students graduated within five years, down from 54 per cent last year and 57.5 percent in 1983, ACT said.