For-Profit Higher Education Responsiveness to Price Shocks: An Investigation of Changes in Post 9-11 GI Bill Allowed Maximum Tuitions

40 Pages Posted: 22 May 2018

See all articles by Matthew Baird

Matthew Baird

RAND Corporation

Michael Kofoed

United States Military Academy

Trey Miller

RAND Corporation

Jennie Wenger

RAND

Date Written: May 31, 2018

Abstract

One hypothesis regarding financial aid is that increased generosity in aid programs gives incentives for universities, particularly for-profit colleges, to increase tuition rates. However, this causal effect is difficult to estimate because identification requires exogenous shocks to a program's generosity. The Post 9/11 GI Bill represented one of the largest expansions of college benefits for veterans and their dependents. In the first version of the bill, the Department of Veterans Affairs offered full funding for public colleges and set the maximum tuition reimbursement for private institutions on a state level. However, in 2010, the VA set the maximum tuition benefit for private schools to one nationwide amount, while continuing to fully fund attendance at public colleges. In this study we use a difference in differences estimator and find that in states where the benefit increased, for-profit universities increased their sticker price tuition by $461. We also find that for-profit institutions in states where the VA cut benefits lowered tuition significantly, exhibiting symmetric behavior with pass through rates of around 5.6 percent. However, for-profit institutions did not increase admissions or enrollments because of the policy change.

Keywords: For-Profit Colleges, GI Bill, Bennett Hypothesis

JEL Classification: I22, I23

Suggested Citation

Baird, Matthew and Kofoed, Michael and Miller, Trey and Wenger, Jennie, For-Profit Higher Education Responsiveness to Price Shocks: An Investigation of Changes in Post 9-11 GI Bill Allowed Maximum Tuitions (May 31, 2018). Available at SSRN: https://ssrn.com/abstract=3174763 or http://dx.doi.org/10.2139/ssrn.3174763

Matthew Baird

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States

Michael Kofoed (Contact Author)

United States Military Academy ( email )

600 Thayer Rd
West Point, NY 10996
United States
801-540-8789 (Phone)

HOME PAGE: http://https://sites.google.com/site/michaelkofoed1

Trey Miller

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States

Jennie Wenger

RAND ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States
310-393-0411 (Phone)

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