The effect of the availability of student credit on tuition: testing the Bennett hypothesis using evidence from a large-scale student loan program in Brazil

João M. P. De Mello and Isabela F. Duarte

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Exploring the expansion of FIES—a large student lending program in Brazil— we test whether eligibility for subsidized student lending causes tuition to rise, in accordance with the Bennett hypothesis. FIES rules created arguably exogenous variation in eligibility across different majors and higher education institutions, which we exploit in a difference-indifferences framework. Using unique information on tuition, we document that FIES eligibility caused tuition to rise. We then estimate a structural demand model to explore whether a reduction in the sensitivity of demand to price increases is one of the possible mechanisms behind this credit-driven tuition rise. Our results show that FIES expansion is associated with a reduction in the tuition elasticity of demand.

Keywords: student lending; tuition inflation; policy evaluation (search for similar items in EconPapers)
JEL-codes: D00 D12 I22 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2020-04-01
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Published in Economía, 1, April, 2020, 20(2), pp. 179 - 222. ISSN: 1529-7470

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