The Effect of the Availability of Student Credit on Tuition: Testing the Bennett Hypothesis Using Evidence from a Large-Scale Student Loan Program in Brazil

Exploring the expansion of FIES—a large student lending program in Brazil—we test whether eligibility for subsidized student lending causes tuition to rise, in accordance with the Bennett hypothesis. FIES rules created arguably exogenous variation in eligibility across different majors and higher ed...

Full description

Saved in:
Bibliographic Details
Published in:Economía (Washington, D.C.) D.C.), 2020-04, Vol.20 (2), p.179-222
Main Authors: DE MELLO, JOÃO M. P., DUARTE, ISABELA F.
Format: Article
Language:English
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Exploring the expansion of FIES—a large student lending program in Brazil—we test whether eligibility for subsidized student lending causes tuition to rise, in accordance with the Bennett hypothesis. FIES rules created arguably exogenous variation in eligibility across different majors and higher education institutions, which we exploit in a difference-indifferences framework. Using unique information on tuition, we document that FIES eligibility caused tuition to rise. We then estimate a structural demand model to explore whether a reduction in the sensitivity of demand to price increases is one of the possible mechanisms behind this credit-driven tuition rise. Our results show that FIES expansion is associated with a reduction in the tuition elasticity of demand.
ISSN:1529-7470
1533-6239
1533-6239
DOI:10.1353/eco.2020.0000