Study Backs View That Colleges Absorb Pell Grant Increases With Higher Tuition

March 07, 2007

Private colleges generally respond to increases in federal Pell Grant aid by raising their tuition, according to a new paper by a pair of economists at the University of Oregon.

The finding tends to support what is known as the “Bennett hypothesis” — the notion, first popularized in the 1980s by the U.S. secretary of education at the time, William J. Bennett, that colleges and universities tend to absorb most federal student aid by increasing their tuition revenue.

The new paper, by Larry D. Singell Jr. and Joe A. Stone, both professors of economics at Oregon, employs a much larger data set than most previous tests of the Bennett hypothesis. Mr. Singell and Mr. Stone examined data from 1,554 four-year colleges and universities from 1988 to 1996. They drew on institutional data collected by the National Science Foundation and by the U.S. Department of Education.

Mr. Singell and Mr. Stone found that public colleges’ tuition for in-state students did not rise in tandem with Pell Grant levels. But private colleges’ tuition, and public colleges’ out-of-state tuition, increased by roughly $800 for every $1,000 increase in Pell recipients’ average grants.

Much of that additional tuition burden, the scholars suggest, is borne by students whose family income is relatively high. The Pell Grant program generally succeeds at expanding lower-income students’ access to college and at allowing lower-income students to attend more expensive institutions than they otherwise would, according to the paper.

The paper is scheduled to appear in the journal Economics of Education Review. A working version is available on Mr. Singell’s Web site.