Student Loans in China by Cheng Baoyan;

Author:Cheng, Baoyan; [Cheng]
Language: eng
Format: epub
Publisher: Lexington Books/Fortress Academic
Published: 2011-08-15T00:00:00+00:00

Chapter Three

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An Empirical Perspective

Economic theory tells us that students are sensitive to the price change among colleges and universities. Many studies have examined the impact of price on college decision and found support for this theory. While there are few empirical studies done to examine the impact of the Government-Subsidized Student Loan Program (GSSLP) on college students in China, there is a rich body of literature in the United States that helps to answer the question of whether financial aid programs impact college enrollment.

Studies on the Effect of Prices on Enrollment

Many studies have found evidence to support the notion that student enrollment decisions are responsive to price. Radner and Miller (1970), through running a regression model using data from School to College: Opportunities for Postsecondary Education, found that students’ responsiveness is inversely related to family income. Although the general approach used in this study was solid, there are some weaknesses in the methodology. For example, they only had access to a small subset of the available data, and the sample of students used by them came from only two states, California and Illinois, thus limiting the generalizability of the findings. Also, they did not include such family background variables as parental education in their model, thus unable to control the effect of family background. Leslie and Brinkman (1987) concluded that every study that had examined the effect of higher education prices on enrollments had proved a negative relationship between them. To be more specific, the best estimate is that on average first-time enrollment rates for students aged eighteen to twenty-four will decline 0.6 percentage points for every $100 price increase. Using the National Longitudinal Survey of Youth, the High School and Beyond senior survey, and the October Current Population Survey, Kane (1995) found that in public two-year institutions a $1,000 difference is associated with 19–29 percent difference in enrollment rates among eighteen- to nineteen-year-olds. Heller (1999), collecting data from different sources such as the Integrated Postsecondary Education Data System, institutional surveys and state population data, found that increases in tuition led to declines in public enrollment.

Moreover, a number of researchers have found that low-income students may be more sensitive to price than students from families with higher incomes. Using the same dataset and a similar general approach as was done by Radner and Miller (1970), Kohn, Manski & Mundel (1974) improved the methodology in their own study on the demand for higher education. For example, in order to reconstruct the set of feasible college alternatives for each student in a more precise way, they used a number of auxiliary data sources, such as the Institutional Research File of the American Council on Education, the Manual of Freshman Class Profiles (1965–1967) of the College Entrance Examination Board, and a file of geographical data. They found not only high price sensitivity for students from low-income families, but also considerable price sensitivity among students from middle-income families. The study by Bishop (1977) has several strengths: using the national, longitudinal Project Talent data and having a large sample size of 27,046 male high-school juniors.

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