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
Date Written: May 31, 2018
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: Suggested Citation