Redesigning Federal Student Aid in Higher Education

We study the equilibrium impact of student aid design in the United States market for sub-baccalaureate higher education. Using data from the universe of aid-eligible colleges, we estimate each college's quality, and an equilibrium model determining choices in this market. We use this model to estimate a host of counterfactual policies, including a targeted voucher policy aimed at maximizing quality of education. This policy highlights that for-profit colleges, despite being lower quality, are more effective at increasing enrollment than public community colleges. Consequently, these schools play an important role in improving the educational outcomes of students.