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Does Federal Student Aid Raise Tuition? New Evidence on For-Profit Colleges

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  • Stephanie Riegg Cellini
  • Claudia Goldin

Abstract

We provide the first comprehensive estimates of the size of the for-profit higher education sector and evaluate whether for-profits increase tuition in response to federal subsidies. By using state administrative data we include institutions that do not participate in federal student aid programs and are missed in official counts. Including these institutions doubles the number of for-profits and increases students by one-third compared with official counts. Aid-eligible institutions charge tuition for sub-baccalaureate (mainly certificate) programs that is about 78 percent higher than that charged by comparable programs in nonparticipating institutions, lending some credence to the "Bennett hypothesis" of federal aid capture.

Suggested Citation

  • Stephanie Riegg Cellini & Claudia Goldin, 2014. "Does Federal Student Aid Raise Tuition? New Evidence on For-Profit Colleges," American Economic Journal: Economic Policy, American Economic Association, vol. 6(4), pages 174-206, November.
    • Handle: RePEc:aea:aejpol:v:6:y:2014:i:4:p:174-206
    Note: DOI: 10.1257/pol.6.4.174
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    1. Chung, Anna S., 2012. "Choice of for-profit college," Economics of Education Review, Elsevier, vol. 31(6), pages 1084-1101.
    2. Stephanie Riegg Cellini, 2009. "Crowded Colleges and College Crowd-Out: The Impact of Public Subsidies on the Two-Year College Market," American Economic Journal: Economic Policy, American Economic Association, vol. 1(2), pages 1-30, August.
    3. Stephanie Riegg Cellini, 2010. "Financial aid and for-profit colleges: Does aid encourage entry?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 29(3), pages 526-552.
    4. Singell, Larry Jr. & Stone, Joe A., 2007. "For whom the Pell tolls: The response of university tuition to federal grants-in-aid," Economics of Education Review, Elsevier, vol. 26(3), pages 285-295, June.
    5. Susan M. Dynarski & Judith E. Scott-Clayton, 2008. "Complexity and Targeting in Federal Student Aid: A Quantitative Analysis," NBER Chapters, in: Tax Policy and the Economy, Volume 22, pages 109-150, National Bureau of Economic Research, Inc.
    6. Turner, Nicholas, 2012. "Who benefits from student aid? The economic incidence of tax-based federal student aid," Economics of Education Review, Elsevier, vol. 31(4), pages 463-481.
    7. Bridget Terry Long, 2004. "How do Financial Aid Policies Affect Colleges?: The Institutional Impact of the Georgia HOPE Scholarship," Journal of Human Resources, University of Wisconsin Press, vol. 39(4).
    8. Caroline Minter Hoxby, 2004. "Introduction to "College Choices: The Economics of Where to Go, When to Go, and How to Pay For It"," NBER Chapters, in: College Choices: The Economics of Where to Go, When to Go, and How to Pay For It, pages 1-12, National Bureau of Economic Research, Inc.
    9. Caroline M. Hoxby, 2004. "College Choices: The Economics of Where to Go, When to Go, and How to Pay For It," NBER Books, National Bureau of Economic Research, Inc, number hoxb04-1, March.
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    More about this item

    JEL classification:

    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and 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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