Association for Public Policy Analysis & Management

This paper quantifies how price regulation influences low-income students’ access to opportunities in higher education. Following a policy change in the state of Texas that shifted tuition-setting authority away from the state legislature to the governing board of each public university, most institutions raised prices and many began charging more for high-demand undergraduate majors, such as business and engineering.  We use administrative data on all Texas public high school graduates from 1996 to 2012 matched to college, financial aid, and earnings records to assess how tuition deregulation affected the representation of disadvantaged students in high-return institutions and majors. Our main approach is a difference-in-difference model, comparing programs that altered pricing and other attributes following deregulation to those that did not while also comparing poor and non-poor students. The results of the study are timely and of broad policy importance beyond the state of Texas, as Florida and Virginia also recently decentralized tuition-setting authority and similar proposals are being considered elsewhere (Australia, Wisconsin, New York, Washington, and Ohio). A careful study of the Texas experience will shed light on the importance of price regulation to the opportunities available to disadvantaged students.