This paper brings together some data on student retention in distance education in the form of graduation rates at a sample of distance institutions. The paper suggests that there is a "distance education deficit" with many distance institutions having less than one-quarter of the graduation rates of conventional institutions. It looks in some detail at the data for one well-known institution--the UK Open University--and surveys some of the reasons why such a deficit should occur and asks what the effects are on students, institutions and society as a whole. The paper suggests that one reason for the deficit is the "category error" of confusing teaching with learning, and that institutions have focused too much on the provision of teaching materials, especially online, and too little on motivating students to learn. It maintains that there is accumulating evidence for the essentiality of proactive contact for overcoming dropout and the importance of making that contact motivational. The paper claims that such an approach is financially viable and can make surpluses for the institutions concerned if carefully designed. Finally, whilst briefly surveying some of the new developments in distance education in the form of Massive Online Open Courses, learning analytics, and the use of smartphones, this paper suggests more speculatively that rather than resources or organisation, the main barriers to increasing student success in distance education are institutional attitudes to student retention.