For-Profit and Traditional Colleges: Institutional Control and Financial Aid Allocation
39 Pages Posted: 16 Nov 2013 Last revised: 22 Mar 2015
Date Written: March 20, 2015
I examine differences in the competitive behavior between for-profit and traditional universities by modeling how these institutions allocate financial aid packages and set net cost according to differing objective functions. I test the implications of the model using data from the 2003-2004 and 2007-2008 waves of the National Postsecondary Student Aid Survey. I use an exponential regression model and correct for self-selection of students into institutions to estimate differences in pricing behavior. For-profit universities annually offer $819.69 less in institutional aid, while their students take on $1,978.45 more in unsubsidized student loans and pay a higher net price of $3,713.58.
Keywords: For-Profit Higher Education, Student Financial Aid, Price Discrimination
JEL Classification: I22, I28, H52
Suggested Citation: Suggested Citation