Student Loans, Marginal Costs, and Markups: Estimates From the PLUS Program

45 Pages Posted: 28 Jul 2016 Last revised: 8 Feb 2018

Mahyar Kargar

University of California, Los Angeles (UCLA) - Anderson School of Management

William Mann

University of California, Los Angeles (UCLA) - Anderson School of Management

Date Written: February 7, 2018

Abstract

We estimate small marginal costs and large markups at private colleges in the United States, and discuss implications for the design of financial aid. For identification, we exploit a tightening of credit standards in the PLUS loan program, which decreased enrollment, revenues, and expenditures at private colleges with low-income students. We estimate that markups represented more than half of charges for students disqualified by the change. Markups were higher at for-profit schools, and in states with fewer public schools and lower education spending. Our results complement prior evidence on the Bennett Hypothesis, and contrast prior estimates of small markups.

Keywords: Student loans, PLUS loans, Bennett Hypothesis, Credit histories, Higher education, Subsidy incidence

JEL Classification: I22, I23, H22, D14, G28

Suggested Citation

Kargar, Mahyar and Mann, William, Student Loans, Marginal Costs, and Markups: Estimates From the PLUS Program (February 7, 2018). Available at SSRN: https://ssrn.com/abstract=2814842 or http://dx.doi.org/10.2139/ssrn.2814842

Mahyar Kargar

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

Los Angeles, CA
United States

William Mann (Contact Author)

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
271
rank
102,225
Abstract Views
1,511
PlumX