Where Do Students Go when For-Profit Colleges Lose Federal Aid?
Stephanie R. Cellini
Lesley J. Turner
- American Economic Journal: Economic Policy (Forthcoming)
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% decrease
in annual enrollment following sanction receipt. Enrollment losses
due to for-profit sanctions are 60-70% 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%.
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