Does Tuition-Setting Authority Determine Whether Tuition Increases at Community Colleges with New Promise Programs?

Abstract

ABSTRACT We evaluate whether the Bennett Hypothesis applies to local-level, single-institution promise programs and account for whether colleges have the authority to raise tuition, versus an external entity holding such authority. Using a sample of 29 community colleges affected by promise programs, we analyze changes in tuition across years 2001–02 to 2015–16 using two-way fixed effects difference-in-differences (DD) analyses, robust and weighted DD estimators, and panel event-studies. Among colleges with the sole authority to set their own tuition, the implementation of a promise program produces 14–17% lower tuition rates, suggesting that colleges do not strategically raise rates to capture promise-based financial aid dollars. When a governor or legislature is the sole entity that sets tuition, colleges experience negligible changes to slight declines in tuition levels, demonstrating that elected officials attempt to keep tuition rates stable or lower. When a statewide, systemwide, or local board retains tuition-setting authority, colleges observe no changes to tuition. Overall, our findings suggest a unique scenario for single-institution programs, where the college initiates or partners with a promise program; these colleges are motivated to keep tuition low to avoid counteracting affordability policies.