Public Higher Education Costs and College Enrollment

How have changes in the costs of enrolling for full-time study at public 2-year and 4-year colleges have affected the decisions about whether and where to enroll in college? We exploit local differences in the growth of tuition at community colleges and public 4-year colleges to study the impact of public higher education costs on the postsecondary enrollment decisions of high school graduates over three decades. We model prospective students’ decisions about whether to attend community college, a public 4-year university in their state of residence, other colleges, or no college at all as relative costs change. Unlike institutional analyses, our contribution is not to model how enrollment changes at a particular college or type of college as costs change. But, we draw from the institutional literature to help identify enrollment impacts by instrumenting college costs using policy variation imposed by state appropriations and tuition caps. We estimate that in counties where local community college tuition doubled (about average for the study period), the likelihood of post-secondary enrollment fell by about 0.06, on a mean of about 0.80. In addition to reducing college enrollment overall, rising costs at community colleges diverted other students to 4-year colleges. Rising relative costs of 4-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 cost setting at the institution level. Our preferred estimates rely on a control function approach that instruments intertemporal changes in institutional costs using state and local appropriations and state policies to restrict tuition growth.