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. (JEL H52, I21, I22, I23, I28)

Student Loan Nudges: Experimental Evidence on Borrowing and Educational Attainment

“…Only 5 percent of CCA students completed a credential within 150 percent of the expected time to degree, compared to 21 percent of students nationwide. 6 Median earnings 6 Degree completion measures are only reported for students who entered college as first-time, full-time, degree-seeking students. This group contains fewer than 40 percent of all community college students in an entry repayment (approximately $4,200 versus $6,563 nationwide), they also experienced slightly worse repayment outcomes.…”

Saving and Wealth Accumulation among Student Loan Borrowers: Implications for Retirement Preparedness

“…For one, borrowing to buffer price increases appears to negatively affect job choice (Rothstein and Rouse 2011), graduate education (Chakrabarti et al 2020), entrepreneurship (Krishnan and Wang 2019), and homeownership (Mezza et al 2020), suggestive of repayment difficulties or credit constraints that might affect saving and investment. Further, students induced to attend for-profit colleges-which tend to serve nontraditional students and offer notoriously low labor market returns (e.g., Cellini and Turner 2019;Darolia et al 2016;Deming et al 2012Deming et al , 2016-borrow more and see marked increases in default (Armona et al 2020, Cellini et al 2020, Goodman and Volz 2020 A comprehensive review of the student loan literature leaves considerable uncertainty about the implications of the rise in aggregate student debt for longer-term savings and preparation for retirement, with only a handful of studies endeavoring to draw a direct connection. One reason is a lack of data with broad coverage of the population and student loan borrowing histories that extend beyond young adulthood.…”