Abstract
We provide the first comprehensive estimates of the size of the for-profit higher education sector and evaluate whether for-profits increase tuition in response to federal subsidies. By using state administrative data we include institutions that do not participate in federal student aid programs and are missed in official counts. Including these institutions doubles the number of for-profits and increases students by one-third compared with official counts. Aid-eligible institutions charge tuition for sub-baccalaureate (mainly certificate) programs that is about 78 percent higher than that charged by comparable programs in nonparticipating institutions, lending some credence to the “Bennett hypothesis” of federal aid capture. (JEL H52, I22, I23, I28)
Highlights
Title IV and For-Profit Higher EducationTitle IV of the Higher Education Act of 1965 allows institutions meeting certain criteria to be eligible to participate in federal student aid programs
Researchers have generally relied on U.S Department of Education data that omits a large number of for-profit institutions that are not eligible to participate in federal student aid programs under Title IV of the Higher Education Act
We draw on new state data to count these non-Title IV (NT4) institutions and generate what we believe to be the first comprehensive estimate of the size of the for-profit postsecondary education sector in the United States
Summary
Title IV of the Higher Education Act of 1965 allows institutions meeting certain criteria to be eligible to participate in federal student aid programs. Title IV programs come in three forms: grants, loans, and work-study. By far the largest Title IV grant program is the Pell Grant, which offers scholarships of up to $5,500 (maximum in 2012) per year for low-income students in eligible institutions. Loan programs include subsidized (for students demonstrating financial need) and unsubsidized Stafford loans, Perkins loans, and PLUS loans for parents. During the 2007/08 academic year, more than $125 billion in federal loans and grants were made to almost 14 million students.. Almost two-thirds of all undergraduates receive some form of federal financial aid During the 2007/08 academic year, more than $125 billion in federal loans and grants were made to almost 14 million students. Almost two-thirds of all undergraduates receive some form of federal financial aid
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