We examine the effects of federal sanctions imposed on for-profit institutions in the 1990s. Using county-level variation in the timing and magnitude of sanctions linked to student loan default rates, we estimate that sanctioned for-profits experience a 68 percent decrease in annual enrollment following sanction receipt. Enrollment losses due to for-profit sanctions are 60–70 percent offset by increased enrollment within local community colleges, where students are less likely to default on federal student loans. Conversely, for-profit sanctions decrease enrollment in local unsanctioned for-profit competitors, likely due to improved information about local options and reputational spillovers. Overall, market enrollment declines by 2 percent.
Cellini, Stephanie R., Rajeev Darolia, and Lesley J. Turner.
"Where Do Students Go When For-Profit Colleges Lose Federal Aid?"
American Economic Journal: Economic Policy,
National Government Expenditures and Education
Analysis of Education
Educational Finance; Financial Aid
Higher Education; Research Institutions
Education: Government Policy