University of California, Merced
Department of Sociology
5200 N. Lake Road
Merced, CA 95348
Institutional Affiliation: University of California, Merced
NBER Working Papers and Publications
|August 2018||When Investor Incentives and Consumer Interests Diverge: Private Equity in Higher Education|
with , : w24976
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.
Published: Charlie Eaton & Sabrina T Howell & Constantine Yannelis & Francesca Cornelli, 2020. "When Investor Incentives and Consumer Interests Diverge: Private Equity in Higher Education," The Review of Financial Studies, vol 33(9), pages 4024-4060.