When Investor Incentives and Consumer Interests Diverge: Private Equity in Higher Education / Charlie Eaton, Sabrina Howell, Constantine Yannelis.

Format:

Book

Author/Creator:

Eaton, Charlie.

Contributor:

National Bureau of Economic Research.

Howell, Sabrina.

Yannelis, Constantine.

Series:

Working Paper Series (National Bureau of Economic Research) no. w24976.

NBER working paper series no. w24976

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

When Investor Incentives and Consumer Interests Diverge

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2018.

Summary:

This paper studies how private equity buyouts create value in higher education, a sector with opaque product quality and intense government subsidy. With novel data on 88 private equity deals involving 994 schools, we show that buyouts lead to higher tuition and per-student debt. Exploiting loan limit increases, we find that private equity-owned schools better capture government aid. After buyouts, we observe lower education inputs, graduation rates, loan repayment rates, and earnings among graduates. Neither school selection nor student body changes fully explain the results. The results indicate that in a subsidized industry maximizing value may not improve consumer outcomes.

Notes:

Print version record

August 2018.