The Cost of Public Higher Education and College Enrollment

Abstract

ABSTRACT How have changes in the price of enrolling full time at public 2- and 4-year colleges affected student decisions about whether and where to enroll in college? Using local differences in the growth of tuition at community colleges and public 4-year colleges, we study the impact of public higher education tuition prices on the post-secondary enrollment decisions of high school graduates over three decades. We model prospective students’ decisions about whether to attend community college, a public four-year university in their state of residence, other colleges, or no college at all, as relative prices change. We identify enrollment impacts by instrumenting tuition prices using policy variation imposed by state appropriations and tuition caps. We estimate that in counties where local community college tuition doubled (about an average for the study period), the likelihood of post-secondary enrollment fell by about 0.05, on a mean of about 0.80. In addition to reducing college enrollment overall, rising tuition at community colleges diverted other students to four-year colleges. Rising relative prices of four-year public colleges similarly diverted some students toward community colleges but did not limit college attendance in the aggregate. We also find evidence of endogeneity in tuition-setting at the institution level.