A recent report from the National Bureau of Economic Research suggests that government subsidies raise the price of higher education.
In their February paper, economists Stephanie Riegg Cellini of George Washington University and Claudia Goldin of Harvard looked at private colleges in five states, comparing those that are eligible for federal Title IV education loans—which is determined by factors like age, accreditation, and full-time programs—to those that are not. The study controlled for "program length, enrollment, year of operation, and a rich set of program, county, and year fixed effects."
By Cellini and Goldin's count, the for-profit college sector is larger by 670,000 students than the number cited by federal agencies, which look only at schools receiving government money. "Rather than being new or ephemeral," the authors write, many of the institutions not receiving federal loan money "are long-lived, surviving and apparently thriving without access to Title IV funds."
Cellini and Goldin found that schools receiving Title IV money "raise tuition above the cost of education to match average student grant aid under Title IV." Tuition was 75 percent higher at those schools than at comparable schools that are ineligible for the aid.