Association for Public Policy Analysis & Management

Panel: Higher Education Finance, Student Loans, and Returns to for-Profits Colleges

(Education)

This panel explores issues that are of key interest in today’s higher education policy arena. In the wake of declining state funding of public institutions, how should public colleges balance tuition increases with spending cuts? Is there a student debt crisis? Is income-based repayment plan appropriate? What are the returns to for-profit college attendance? The panel’s first paper focuses on the declining state funding to post-secondary education and the impacts on tuition and spending. When resources are scarce, how should public colleges balance tuition increases with spending cuts? The authors jointly estimate the impact of changes in price and spending on student enrollment and degree completion using variation in state and local appropriations as well as tuition regulation policies. They find that enrollment and completion in non-selective public institutions is much more responsive to increases in spending than to revenue-neutral reductions in price. The second paper provides an economic perspective on policy issues related to student debt in the United States. The author describes the structure of the US loan market, which is a joint venture of the public and private sectors. She then turns to three topics that are central to the policy discussion of student loans: whether there is a student debt crisis, the costs and benefits of interest subsidies, and the suitability of an income-based repayment system for student loans in the US. She closes with a discussion of the gaps in the data required to fully analyze and steer student-loan policy. The panel’s third paper investigates the effect of for-profit college attendance on graduation, student loan holdings, default, and earnings. It exploits local labor demand shocks and their interactions with the pre-existing supply of for-profit colleges in these local areas to obtain plausibly exogenous variation in for-profit enrollment. For a given labor demand shock, the paper finds that enrollment in for-profit colleges rises considerably relative to enrollment in other colleges when for-profit supply is higher. Exploiting this variation across time and space, it uses an instrumental variables estimation strategy which reveals that students attending for-profit colleges are more likely to originate student loans, originate a larger volume of student loans, and are more likely to default. However, for-profit students are equally likely to graduate, and their earnings six years after graduation are no different from their public counterparts. The final paper draws on population-level administrative data from the U.S. Department of Education and the Internal Revenue Service to quantify the impact of for-profit college attendance on the employment and earnings of over 1.4 million students. Descriptive analysis of degree-seeking students suggests that on average associate’s and bachelor's degree students experience a decline in earnings after attendance, relative to their own earnings in years prior to attendance. Master’s degree students and students who complete their degrees appear to experience better outcomes, with positive earnings gains. Difference-in-difference analysis of certificate students suggests that, despite much higher costs of attendance, earnings effects are smaller in the for-profit sector relative to the effects for comparable students in public community colleges.