Abstract
We estimate small marginal costs and large markups at private colleges in the United States, and discuss implications for the design of financial aid. For identification, we exploit a tightening of credit standards in the PLUS loan program, which decreased enrollment, revenues, and expenditures at private colleges with low-income students. We estimate that markups represented more than half of charges for students disqualified by the change. Markups were higher at for-profit schools, and in states with fewer public schools and lower education spending. Our results complement prior evidence on the Bennett Hypothesis, and contrast prior estimates of small markups.
Original language | English (US) |
---|---|
Number of pages | 45 |
DOIs | |
State | Published - Jul 28 2016 |
Externally published | Yes |
Keywords
- Student loans
- PLUS loans
- Bennett Hypothesis
- Credit histories
- Higher education
- Subsidy incidence