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Accounting for the Rise in College Tuition

Grey Gordon and Aaron Hedlund

No 1514, Working Papers from Department of Economics, University of Missouri

Abstract: We develop a quantitative model of higher education to test explanations for the steep rise in college tuition between 1987 and 2010. The framework extends the quality maximizing college paradigm of Epple, Romano, Sarpca, and Sieg (2013) and embeds it in an incomplete markets, life-cycle environment. We measure how much changes in underlying costs, reforms to the Federal Student Loan Program (FSLP), and changes in the college earnings premium have caused tuition to increase. All these changes combined generate a 106% rise in net tuition between 1987 and 2010, which more than accounts for the 78% increase seen in the data. Changes in the FSLP alone generate a 102% tuition increase, and changes in the college premium generate a 24% increase. Our ?ndings cast doubt on Baumol’s cost disease as a driver of higher tuition.

Keywords: Higher Education; College Costs; Tuition; Student Loans (search for similar items in EconPapers)
JEL-codes: E21 G11 D40 D58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-edu and nep-mac
Date: 2015-09-28
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https://economics.missouri.edu/working-papers/2015/wp1514_hedlund.pdf (application/pdf)

Related works:
Chapter: Accounting for the Rise in College Tuition (2017) Downloads
Working Paper: Accounting for the Rise in College Tuition (2016) Downloads
Working Paper: Accounting for the Rise in College Tuition (2015) Downloads
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