We applied TETRAD II, a causal discovery program developed in Carnegie Mellon University’s Department of Philosophy, to a database containing information on 204 U.S. colleges, collected by the US News and World Report magazine for the purpose of college ranking. Our analysis focuses on possible causes of low freshmen retention in U.S. colleges. TETRAD II finds a set of causal structures that are compatible with the data. One apparently robust finding is that student retention is directly related to the average test scores and high school class standing of the incoming freshmen. When test scores and class standing are controlled for, factors such as student faculty ratio, faculty salary, and university’s educational expenses per student are all independent of both retention and graduation rates, and, therefore, do not seem to directly influence student retention. Furthermore, simple linear regression applied to test scores, class standing, and retention data showed that the test scores and class standing explain 52.6% of the variance in freshmen retention rate and 62.5% of the variance in graduation rate (test scores alone explain 50.5% and 62.0% respectively). This result becomes even stronger when computed for the group of top ranking colleges -- regression applied to a group of 41 top ranking colleges showed explanation of 68.3% of the variance in freshmen retention rate and 77.0% in graduation rate (66.6% and 75% respectively for test scores alone). As the test scores and classtanding are both indicators of the overall quality of the incoming students, we predict that one of the most effective ways of improving student retention in an individual college is increasing the college’s selectivity. High selectivity will lead to higher quality of the incoming students and, effectively, to higher retention rate.