How Does the Elimination of State Aid to For-Profit Colleges Affect Enrollment? Evidence from California’s Reforms

Oded Gurantz, Ryan Sakoda and Sahyak Sarkar
Additional contact information
Oded Gurantz: University of Missouri
Ryan Sakoda: University of Iowa
Sahyak Sarkar: University of California, Davis

No 21-356, Upjohn Working Papers from W.E. Upjohn Institute for Employment Research

Abstract: This paper examines how financial aid reform based on postsecondary institutional performance impacts student choice. Federal and state regulations often reflect concerns about the private, for-profit sector’s poor employment outcomes and high loan defaults, despite the sector’s possible theoretical advantages. We use student-level data to examine how eliminating public subsidies to attend low-performing for-profit institutions impacts students’ college enrollment and completion behavior. Beginning in 2011, California tightened eligibility standards for their state aid program, effectively eliminating most for-profit eligibility. Linking data on aid application to administrative payment and postsecondary enrollment records, this paper utilizes a difference-in differences strategy to investigate students’ enrollment and degree completion responses to changes in subsidies. We find that restricting the use of the Cal Grant at for-profit institutions resulted in significant state savings but led to relatively small changes in students’ postsecondary trajectories. For older, nontraditional students we find no impact on enrollment or degree completion outcomes. Similarly, for high school graduates, we find that for-profit enrollment remains strong. Unlike the older, nontraditional students, however, there is some evidence of declines in for-profit degree completion and increased enrollment at community colleges among the high school graduates, but these results are fairly small and sensitive to empirical specification. Overall, our results suggest that both traditional and nontraditional students have relatively inelastic preferences for for-profit colleges under aid-restricting policies.

Keywords: financial aid reform; postsecondary education; gainful employment; consumer protection (search for similar items in EconPapers)
JEL-codes: I21 I22 I23 I28 (search for similar items in EconPapers)
Date: 2021-11
New Economics Papers: this item is included in nep-edu and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://research.upjohn.org/cgi/viewcontent.cgi?ar ... ext=up_workingpapers (application/pdf)
This material is copyrighted. Permission is required to reproduce any or all parts.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:upj:weupjo:21-356

Access Statistics for this paper

More papers in Upjohn Working Papers from W.E. Upjohn Institute for Employment Research 300 S. Westnedge Ave. Kalamazoo, MI 49007 USA. Contact information at EDIRC.
Bibliographic data for series maintained by (wyrwa@upjohn.org).