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How Does the Elimination of State Aid to For-Profit Colleges Affect Enrollment? Evidence from California’s Reforms

Author

Listed:
  • Oded Gurantz

    (University of Missouri)

  • Ryan Sakoda

    (University of Iowa)

  • Sahyak Sarkar

    (University of California, Davis)

Abstract
This paper examines how financial aid reform based on postsecondary institutional performance impacts student choice. Federal and state regulations often reflect concerns about the private, for-profit sector’s poor employment outcomes and high loan defaults, despite the sector’s possible theoretical advantages. We use student-level data to examine how eliminating public subsidies to attend low-performing for-profit institutions impacts students’ college enrollment and completion behavior. Beginning in 2011, California tightened eligibility standards for their state aid program, effectively eliminating most for-profit eligibility. Linking data on aid application to administrative payment and postsecondary enrollment records, this paper utilizes a difference-in differences strategy to investigate students’ enrollment and degree completion responses to changes in subsidies. We find that restricting the use of the Cal Grant at for-profit institutions resulted in significant state savings but led to relatively small changes in students’ postsecondary trajectories. For older, nontraditional students we find no impact on enrollment or degree completion outcomes. Similarly, for high school graduates, we find that for-profit enrollment remains strong. Unlike the older, nontraditional students, however, there is some evidence of declines in for-profit degree completion and increased enrollment at community colleges among the high school graduates, but these results are fairly small and sensitive to empirical specification. Overall, our results suggest that both traditional and nontraditional students have relatively inelastic preferences for for-profit colleges under aid-restricting policies.

Suggested Citation

  • Oded Gurantz & Ryan Sakoda & Sahyak Sarkar, 2021. "How Does the Elimination of State Aid to For-Profit Colleges Affect Enrollment? Evidence from California’s Reforms," Upjohn Working Papers 21-356, W.E. Upjohn Institute for Employment Research.
    • Handle: RePEc:upj:weupjo:21-356
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    References listed on IDEAS

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    More about this item

    Keywords

    financial aid reform; postsecondary education; gainful employment; consumer protection;
    All these keywords.

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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