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Where Do Students Go When For-Profit Colleges Lose Federal Aid?

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  • Stephanie R. Cellini
  • Rajeev Darolia
  • Lesley J. Turner

Abstract

We examine the effects of federal sanctions imposed on for-profit institutions in the 1990s. Using county-level variation in the timing and magnitude of sanctions linked to student loan default rates, we estimate that sanctioned for-profits experience a 68 percent decrease in annual enrollment following sanction receipt. Enrollment losses due to for-profit sanctions are 60–70 percent offset by increased enrollment within local community colleges, where students are less likely to default on federal student loans. Conversely, for-profit sanctions decrease enrollment in local unsanctioned for-profit competitors, likely due to improved information about local options and reputational spillovers. Overall, market enrollment declines by 2 percent.

Suggested Citation

  • Stephanie R. Cellini & Rajeev Darolia & Lesley J. Turner, 2020. "Where Do Students Go When For-Profit Colleges Lose Federal Aid?," American Economic Journal: Economic Policy, American Economic Association, vol. 12(2), pages 46-83, May.
    • Handle: RePEc:aea:aejpol:v:12:y:2020:i:2:p:46-83
    DOI: 10.1257/pol.20180265
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    Cited by:

    1. Lisa J. Dettling & Sarena Goodman & Sarah Reber, 2022. "Saving and Wealth Accumulation among Student Loan Borrowers: Implications for Retirement Preparedness," Finance and Economics Discussion Series 2022-019, Board of Governors of the Federal Reserve System (U.S.).
    2. Armona, Luis & Chakrabarti, Rajashri & Lovenheim, Michael F., 2022. "Student debt and default: The role of for-profit colleges," Journal of Financial Economics, Elsevier, vol. 144(1), pages 67-92.
    3. Sarena Goodman & Alice Henriques Volz, 2020. "Attendance Spillovers between Public and For-Profit Colleges: Evidence from Statewide Variation in Appropriations for Higher Education," Education Finance and Policy, MIT Press, vol. 15(3), pages 428-456, Summer.
    4. Todd R. Jones & Daniel Kreisman & Ross Rubenstein & Cynthia Searcy & Rachana Bhatt, 2022. "The Effects of Financial Aid Loss on Persistence and Graduation: A Multi-Dimensional Regression Discontinuity Approach," Education Finance and Policy, MIT Press, vol. 17(2), pages 206-231, Spring.
    5. Maarten De Ridder & Simona Hannon & Damjan Pfajfar, 2020. "The Multiplier Effect of Education Expenditure," Finance and Economics Discussion Series 2020-058, Board of Governors of the Federal Reserve System (U.S.).
    6. Adam Looney & Constantine Yannelis, 2020. "How To Fix Federal Student Loan Programs," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 39(2), pages 540-547, March.
    7. Minaya, Veronica & Moore, Brendan & Scott-Clayton, Judith, 2023. "The effect of job displacement on public college enrollment: Evidence from Ohio," Economics of Education Review, Elsevier, vol. 92(C).
    8. David Card & Alex Solis, 2022. "Measuring the Effect of Student Loans on College Persistence," Education Finance and Policy, MIT Press, vol. 17(2), pages 335-366, Spring.
    9. Luis Armona & Rajashri Chakrabarti & Michael F. Lovenheim, 2018. "How Does For-profit College Attendance Affect Student Loans, Defaults and Labor Market Outcomes?," NBER Working Papers 25042, National Bureau of Economic Research, Inc.
    10. Veronica Minaya & Brendan Moore & Judith Scott-Clayton, 2020. "The Effect of Job Displacement on College Enrollment: Evidence from Ohio," NBER Working Papers 27694, National Bureau of Economic Research, Inc.
    11. Juan Esteban Carranza & María Marta Ferreyra & Ana Maria Gazmuri, 2023. "The Dynamic Market for Short-Cycle Higher Education Programs," Borradores de Economia 1265, Banco de la Republica de Colombia.
    12. Carranza, Juan Esteban & Ferreyra, Maria Marta & Gazmuri, Ana, 2026. "The Dynamic Market for Short-Cycle Higher Education Programs," TSE Working Papers 26-1717, Toulouse School of Economics (TSE).
    13. Gregory Gilpin & Michael Kofoed, 2020. "Employer-Sponsored Education Assistance and Graduate Program Choice, Cost, and Finance," Research in Higher Education, Springer;Association for Institutional Research, vol. 61(4), pages 431-458, June.
    14. Lau, Christopher V., 2020. "Are federal student loan accountability regulations effective?," Economics of Education Review, Elsevier, vol. 75(C).
    15. Stephanie Riegg Cellini & Rajeev Darolia, 2017. "High Costs, Low Resources, and Missing Information: Explaining Student Borrowing in the For-Profit Sector," The ANNALS of the American Academy of Political and Social Science, , vol. 671(1), pages 92-112, May.

    More about this item

    JEL classification:

    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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