Where do students go when for-Profit colleges lose federal aid?

Stephanie R. Cellini; Rajeev Darolia; Lesley J. Turner

doi:10.1257/POL.20180265

Where do students go when for-Profit colleges lose federal aid?

Stephanie R. Cellini, Rajeev Darolia, Lesley J. Turner

Research output: Contribution to journal › Article › peer-review

7 Scopus citations

Abstract

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.

Original language	English
Pages (from-to)	46-83
Number of pages	38
Journal	American Economic Journal: Economic Policy
Volume	12
Issue number	2
DOIs	https://doi.org/10.1257/POL.20180265
State	Published - May 1 2020

Bibliographical note

Funding Information:
* Cellini: Trachtenberg School of Public Policy and Public Administration, George Washington University, 805 21st Street, NW, Suite 601, Washington, DC, 20052, and NBER (email: scellini@gwu.edu); Darolia: Martin School of Public Policy and Administration, University of Kentucky, 427 Patterson Office Tower, Lexington, KY 40506, and IZA (email: rajeev.darolia@uky.edu); Turner: Department of Economics, University of Maryland, 402 Calhoun Hall, Nashville, TN 37240, NBER, and CESifo (email: turner@econ.umd.edu). John Friedman was coeditor for this article. We thank Josh Angrist, Mary Ann Bronson, Celeste Carruthers, David Deming, Caroline Hoxby, staff at the Federal Reserve Bank of Philadelphia, and seminar participants from the 2014 APPAM annual meeting, 2015 AEFP annual meeting, 2018 AEA annual meeting, 2018 NBER Spring Education Program Meeting, Federal Reserve Bank of Cleveland Policy Summit, US Bureau of Labor Statistics, DC Economics of Education Working Group, George Washington University, Syracuse University, University of Kentucky, and University of Missouri for useful discussions and comments. John Soriano, Andrew Sullivan, and Heath Witzen provided excellent research assistance. This paper is based upon work supported by the Association for Institutional Research, the National Science Foundation, the National Center for Education Statistics, and the National Postsecondary Education Cooperative under Association for Institutional Research Grant Number RG14-5352. Opinions reflect those of the authors and do not necessarily reflect those of the granting agencies.

Publisher Copyright:
© 2020 American Economic Association.

ASJC Scopus subject areas

Economics, Econometrics and Finance (all)

Access to Document

10.1257/POL.20180265

Cite this

@article{1845122171cf4066912fa98c141a4f1e,

title = "Where do students go when for-Profit colleges lose federal aid?",

abstract = "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.",

author = "Cellini, {Stephanie R.} and Rajeev Darolia and Turner, {Lesley J.}",

note = "Funding Information: * Cellini: Trachtenberg School of Public Policy and Public Administration, George Washington University, 805 21st Street, NW, Suite 601, Washington, DC, 20052, and NBER (email: scellini@gwu.edu); Darolia: Martin School of Public Policy and Administration, University of Kentucky, 427 Patterson Office Tower, Lexington, KY 40506, and IZA (email: rajeev.darolia@uky.edu); Turner: Department of Economics, University of Maryland, 402 Calhoun Hall, Nashville, TN 37240, NBER, and CESifo (email: turner@econ.umd.edu). John Friedman was coeditor for this article. We thank Josh Angrist, Mary Ann Bronson, Celeste Carruthers, David Deming, Caroline Hoxby, staff at the Federal Reserve Bank of Philadelphia, and seminar participants from the 2014 APPAM annual meeting, 2015 AEFP annual meeting, 2018 AEA annual meeting, 2018 NBER Spring Education Program Meeting, Federal Reserve Bank of Cleveland Policy Summit, US Bureau of Labor Statistics, DC Economics of Education Working Group, George Washington University, Syracuse University, University of Kentucky, and University of Missouri for useful discussions and comments. John Soriano, Andrew Sullivan, and Heath Witzen provided excellent research assistance. This paper is based upon work supported by the Association for Institutional Research, the National Science Foundation, the National Center for Education Statistics, and the National Postsecondary Education Cooperative under Association for Institutional Research Grant Number RG14-5352. Opinions reflect those of the authors and do not necessarily reflect those of the granting agencies. Publisher Copyright: {\textcopyright} 2020 American Economic Association.",

year = "2020",

month = may,

day = "1",

doi = "10.1257/POL.20180265",

language = "English",

volume = "12",