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

Authors

Oded Gurantz, University of MissouriFollow
Ryan Sakoda, University of Iowa
Shayak Sarkar, University of California, Davis

Publication Date

11-11-2021

Series

Upjohn Institute working paper ; 21-356

DOI

10.17848/wp21-356

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.

Issue Date

November 2021

Note

Upjohn project #58158

Sponsorship

W.E. Upjohn Institute for Employment Research Early Career Research Award 20-158-07, Center for American Progress Equitable Growth Fund, and the Smith-Richardson Foundation Grant

Subject Areas

EDUCATION; Postsecondary education