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Financial aid and for-profit colleges: Does aid encourage entry?

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  • Stephanie Riegg Cellini

    (Assistant Professor, Trachtenberg School of Public Policy Administration, George Washington University)

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    Abstract

    Concerns over rising college tuition and slow economic growth have brought renewed attention to the role of federal and state financial aid programs in opening access to education. Despite a large body of literature examining the effects of grant aid on four-year and public two-year college enrollment, for-profit colleges-particularly the vast majority that offer two-year degrees and certificates-have largely been ignored. Using panel data methods and a new administrative data set of for-profit colleges operating in California between 1989 and 2003, I assess the impact of the federal Pell Grant program, the G.I. Bill, and California's Cal Grant program on the net number of for-profit colleges per county. The results suggest that for both Pell and Cal Grants, increases in the per-student maximum award encourage for-profit entry. This relationship is particularly strong in counties with high adult poverty levels, where more students are eligible for aid. Further, these gains in the private sector do not appear to come at the expense of the public sector. Rather, public community colleges also experience enrollment gains as the generosity of Pell and Cal Grants increases, although this reaction appears to be weaker than the reaction of for-profits. © 2010 by the Association for Public Policy Analysis and Management.

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    File URL: http://hdl.handle.net/10.1002/pam.20508
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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Journal of Policy Analysis and Management.

    Volume (Year): 29 (2010)
    Issue (Month): 3 ()
    Pages: 526-552

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    Handle: RePEc:wly:jpamgt:v:29:y:2010:i:3:p:526-552

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    Web page: http://www3.interscience.wiley.com/journal/34787/home

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    1. Thomas J. Kane, 1995. "Rising Public College Tuition and College Entry: How Well Do Public Subsidies Promote Access to College?," NBER Working Papers 5164, National Bureau of Economic Research, Inc.
    2. Michael J. Rizzo & Ronald G. Ehrenberg, 2003. "Resident and Nonresident Tuition and Enrollment at Flagship State Universities," NBER Working Papers 9516, National Bureau of Economic Research, Inc.
    3. David M. Linsenmeier & Harvey S. Rosen & Cecilia Elena Rouse, 2006. "Financial Aid Packages and College Enrollment Decisions: An Econometric Case Study," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 126-145, February.
    4. Ronald G. Ehrenberg & Daniel R. Sherman, 1984. "Optimal Financial Aid Policies for a Selective University," Journal of Human Resources, University of Wisconsin Press, vol. 19(2), pages 202-230.
    5. Dynarski, Susan, 2002. "The Consequences of Merit Aid," Working Paper Series, Harvard University, John F. Kennedy School of Government rwp02-051, Harvard University, John F. Kennedy School of Government.
    6. Joshua D. Angrist, 1993. "The effect of veterans' benefits on education and earnings," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 46(4), pages 637-652, July.
    7. Timothy F. Bresnahan & Peter C. Reiss, 1987. "Do Entry Conditions Vary across Markets?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 833-882.
    8. Neil S. Seftor & NSarah E. Turner, 2002. "Back to School: Federal Student Aid Policy and Adult College Enrollment," Journal of Human Resources, University of Wisconsin Press, vol. 37(2), pages 336-352.
    9. Marcus Stanley, 2003. "College Education And The Midcentury Gi Bills," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 118(2), pages 671-708, May.
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    Cited by:
    1. David J. Deming & Claudia Goldin & Lawrence F. Katz, 2012. "The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 26(1), pages 139-64, Winter.
    2. Cory Koedel & Rajeev Darolia & Paco Martorell & Katie Wilson & Francisco Perez-Arce, 2014. "Do Employers Prefer Workers Who Attend For-Profit Colleges? Evidence from a Field Experiment," Working Papers, Department of Economics, University of Missouri 141, Department of Economics, University of Missouri.
    3. Cellini, Stephanie Riegg, 2012. "For-Profit Higher Education: An Assessment Of Costs And Benefits," National Tax Journal, National Tax Association, vol. 65(1), pages 153-79, March.
    4. Darolia, Rajeev, 2013. "Integrity versus access? The effect of federal financial aid availability on postsecondary enrollment," Journal of Public Economics, Elsevier, Elsevier, vol. 106(C), pages 101-114.

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