The Credits that Count: How Credit Growth and Financial Aid Affect College Tuition and Fees
50 Pages Posted: 18 Mar 2012
There are 2 versions of this paper
The Credits that Count: How Credit Growth and Financial Aid Affect College Tuition and Fees
The Credits that Count: How Credit Growth and Financial Aid Affect College Tuition and Fees
Date Written: March 15, 2012
Abstract
Using a two-stage least squares model, we build a macroeconomic model of supply and demand for US higher education as measured by enrollment. We find that college education benefits (e.g. relative earnings and employment level), credit factors (e.g. student loan amounts and household debt), and financial aid shift demand. Higher tuition prices increase appeal of higher education for students but credit constraints put a barrier on demand growth. Tuition prices and debt levels are highly correlated, suggesting that students respond to higher tuition prices by borrowing. School's operating costs as well as tuition and non-tuition revenue drive supply. Schools can use tuition prices to signal quality, and relative demand-side price in-elasticity allows them to raise prices. For the private institution sector alone, we see a higher level of consumer price sensitivity, with schools determining enrollment levels and adjusting tuition price accordingly.
Keywords: demand for schooling, educational economics, educational finance, state and federal aid, student financial aid
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Does Aid Matter? Measuring the Effect of Student Aid on College Attendance and Completion
-
Does Aid Matter? Measuring the Effect of Student Aid on College Attendance and Completion
-
Hope for Whom? Financial Aid for the Middle Class and its Impact on College Attendance
-
By John Bound and Sarah E. Turner
-
The Effect of Veterans Benefits on Veterans' Education and Earnings
-
The Enrollment Effects of Merit-Based Financial Aid: Evidence from Georgia's Hope Scholarship
By Christopher Cornwell, David B. Mustard, ...
-
A Quasi-Experimental Estimate of the Impact of Financial Aid on College-Going