Effects of key state policies on private colleges and universities: sustaining private-sector capacity in the face of the higher education access challenge

Abstract

The relationship between key state policy variables — (1) relative (private–public) tuition prices, (2) state student-aid funding, and (3) public institution density — and the competitive position of private colleges and universities is examined. Elite private schools are found to be nearly impervious to state policy. Large and moderately selective private institutions are adversely affected by public institution density and low public prices. Such prices divert students who would otherwise prefer these private institutions to similar public schools. State student aid funding most affects the enrollment market shares of the small, low-selectivity private colleges enrolling the greatest proportions of minority and modest-income students. The findings suggest state policies in this era of strong demand for higher education and constrained public sector capacity should use price signals (student aid and public institution pricing) to encourage students to consider seriously whether private higher education might serve their needs as well as or better than public institutions.