The Effect of Shocks to College Revenues on For-profit Enrollment: Spillover from the Public Sector

Abstract

This paper investigates whether declines in public funding for post-secondary institutions have increased for-profit enrollment. The two primary channels through which funding might operate to reallocate students across sectors are price (measured by tuition) and quality (measured by resource constraints). We estimate, on average, that a 10 percent cut in appropriations raises tuition about 1to 2 percent and decreases faculty resources by ½ to 1 percent, creating substantial bottlenecks for prospective students on both price and quality. These cuts, in turn, generate a nearly one percentage point increase in the for-profit market share of "elastic" enrollment (i.e. attendees of community colleges plus for-profit institutions), owing entirely to students who, in a better funding environment, would have attended a public institution. We estimate an elasticity of forprofit enrollment with respect to state and local appropriations of 0.2. Finally, we extend our analysis to show that for every 1 percent increase in flagship tuition generated by funding shortfalls, for-profit attendance increases by 1½ percent.

Where Do Students Go When For-Profit Colleges Lose Federal Aid?

“…First, it is evident that students in sanctioned for-profit institutions can and do find programs to fit their needs in the public sector. Our results confirm the findings of Cellini (2009) and Goodman and Henriques (2015), in that there appears to be strong competition for students across sectors at the two-year college level.…”

“…The question of whether for-profit and public institutions compete for students is also independently important given the overlap in programs offered by two-year public and for-profit institutions (e.g., Cellini 2009) and disparate costs (e.g., Laband and Lentz 2004;Cellini 2012). Two recent papers examine enrollment spillovers between the for-profit and public sectors due to changes in prices, resources, or institutional availability and find evidence of substitution (Goodman and Henriques 2015;Armona, Chakrabarti and Lovenheim 2016). Similarly, our analysis contributes to broader debates in education policy, as issues of competition and public-private crowd-out arise in debates over universal preschool, charter schools, and voucher programs (e.g., Bassok, Fitzpatrick and Loeb 2014;Epple, Figlio and Romano 2004).…”

Does Regulating For‐profit Colleges Improve Educational Outcomes? What We Know, What We Don't Know, and What We Need to Find Out

“…Do public institutions have the capacity to absorb most FPC students given current fiscal constraints? Goodman and Henriques () find that one driver of the rise in FPCs during the 2000s was the decline in state higher education appropriations. Chung () shows that higher community college tuition also drives FPC enrollment.…”