Sleep deprivation was found to be linked to a lower grade point average (GPA), therefore reducing the likelihood of graduating.
However, sleep-deprived freshman students - those in their first year - don't face missing out on a degree by having bad sleeping habits, as long as they are fixed by their final year.
Researchers say sleep deprivation is common among students, who often juggle studying and socialising with a part-time job.
Sleep deprivation slows learning, impacts memory, and makes students more likely to skip class in order to catch up with sleep, they said.
Researchers from Montclair State University and Rutgers Universality were behind the study of 7,000 people.
Around half were college students with GPA information. The rest of the volunteers had already graduated.
The freshmen had a follow-up interview every year, allowing researchers to analyse their sleep during their entire time at university.
In each wave, students were quizzed on how sleep deprived they felt, if they worked, and how their health was.
They were asked if they smoked, if they binge drank, how often they exercised, and to rate how they felt on a 'purpose of life scale'.
The student's end-of-semester GPA from the school was also obtained, for the study published in Preventive Medicine by Elsevier.
Details on whether the volunteers graduated was also recorded by the scientists, led by by Dr Wei-Lin Chen.
Forty-two per cent of respondents reported chronic sleep deprivation in the spring of their freshman year.
The term is generally defined as obtaining inadequate sleep to support adequate daytime alertness.
While the amount of sleep each individual needs for normal function varies, the recommended amount is seven to nine hours every night.
Results showed a chronic lack of sleep was linked to a lower GPA.
Writing in the journal, the scientists said: 'Sleep deprivation predicts the likelihood of obtaining a college degree'.
Researchers also found that those who reported chronic sleep deprivation in their senior year were 40 per cent less likely to graduate.
Those who reported chronic sleep deprivation during their freshman and senior years were 25 per cent less likely to graduate.
Suffering chronic sleep deprivation during freshman year only was not associated with a lower likelihood of graduation.
The likelihood of a student graduating didn't appear to show any links with their health behaviours or experiences through college.
The authors said: 'This finding suggests that chronic sleep deprivation may have an independent effect on academic outcomes that does not operate through the influence on health behaviors.'
One explanation why sleep so largely affects students' in their senior year may be due to the high amount of coursework, the team said.
Final year of studies requires students to work exceptionally hard to meet the pass grade, whereas freshman students can breeze through.
The authors wrote: 'Required coursework in the major often requires a higher grade to pass than general education courses do.'
Although they did not spell out how many students on average are sleep deprived, previous studies have noted 'alarming rates of insufficient sleep'.
One survey conducted by Virginia Commonwealth University in 2010 found that up to 70 per cent of college students are sleep deprived.
Evidence exists to show sleep loss can worsen anxiety and sadness, derail happiness and enthusiasm, make you more angry and eat unhealthily.
The Daily Mail
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