Working Paper: NBER ID: w24976
Authors: Charlie Eaton; Sabrina Howell; Constantine Yannelis
Abstract: 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.
Keywords: private equity; higher education; tuition; student debt; government aid
JEL Codes: G24; G38; H52; I2; J01
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| private equity buyouts (G34) | higher tuition (I23) |
| private equity buyouts (G34) | increased per-student debt (H74) |
| private equity buyouts (G34) | better capture of government aid (H53) |
| private equity buyouts (G34) | decline in educational inputs (I21) |
| decline in educational inputs (I21) | deterioration in student outcomes (I21) |
| decline in educational inputs (I21) | graduation rates drop (I21) |
| decline in educational inputs (I21) | loan repayment rates decrease (G51) |
| decline in educational inputs (I21) | average earnings fall (J31) |