Association for Public Policy Analysis & Management

Between 2000 and 2010, U.S. public postsecondary schools experienced widespread and uneven changes in funding from state and local appropriations. We estimate that statewide funding cuts lead to a decrease in public attendance that is offset by an increase in for-profit attendance, with no change in overall enrollment rates. We document a corresponding increase in borrowing, driven by both a shift in attendance toward a higher-borrowing sector and public institutions price-adjusting to offset losses in revenue. Finally, we examine potential channels underlying these results and detect meaningful changes in public universities’ tuition, faculty, and competitive admissions slots.