Does the Bennett Hypothesis Hold in Professional Education? An Empirical Analysis


Policymakers have been debating the Bennett Hypothesis—whether colleges increase tuition after the federal government increases access to student loans—for decades. Yet most of the prior research has focused on studying small changes to loan limits or Pell Grants for undergraduate students. In this study, I examine whether business schools (the most popular master’s program) and medical schools (one of the most-indebted programs) responded to a large increase in federal student loan limits in 2006 following the creation of the Grad PLUS program by raising tuition or living expenses as well as examining whether student debt burdens also increased. Using two quasi-experimental estimation strategies and program-level data from 2001 to 2016, I find little consistent evidence to support the Bennett Hypothesis in either medical or business schools.

This is a preview of subscription content, log in to check access.

Fig. 1
Fig. 2


  1. 1.

    Professional students enrolled in fields such as public health, pharmacy, or clinical psychology were subject to annual loan limits of $31,000 prior to 2006 (Bhole 2017). For the sake of brevity (and because they are not the focus of my analyses), I do not discuss them in more detail in this paper.

  2. 2.

    The origins of the idea date back to at least 1976 (Gladieux and Wolanin 1976), but it was popularized by Secretary Bennett. Thank you to Beth Popp Berman for bringing this piece to my attention.

  3. 3.

    An ‘adverse credit history’ is defined as having at least $2,085 in debt at least 90 days delinquent in the last 2 years or having a foreclosure, default, or wage garnishment in the last 5 years (Federal Student Aid 2015).

  4. 4.

    Unfortunately, a lack of data availability on program-level operating costs at the graduate/professional level makes it impossible at this point to fully separate Bowen, Baumol, and Bennett effects.

  5. 5.

    The estimate for business students includes both full-time and part-time students. Since my analysis focuses on full-time students only, the borrowing rate is likely higher.

  6. 6.

    U.S. News also surveys osteopathic programs under the medicine section of the guidebook, but I omitted those programs (approximately 30) to ensure a more comparable sample.

  7. 7.

    These colleges could have had a business school that was either not accredited by AACSB or did not respond to the survey in any year, but this represents very few full-time students who could have been affected by the increase in federal student loan limits.

  8. 8.

    The full set of coefficients is available upon request from the author.

  9. 9.

    Under an alternative set fair-value accounting estimates (which base projections on market risk instead of Treasury yields), Grad PLUS loans are already viewed as being unprofitable for the federal government.


  1. AACSB International. (2017). Eligibility procedures and accreditation standards for business accreditation. Tampa, FL: Author.

    Google Scholar 

  2. Archibald, R. B., & Feldman, D. H. (2008). Explaining increases in higher education costs. The Journal of Higher Education,79(3), 268–295.

    Article  Google Scholar 

  3. Archibald, R. B., & Feldman, D. H. (2016). Federal financial aid policy and college behavior. Washington, DC: American Council on Education.

    Google Scholar 

  4. Armstrong, J., Carlson, A., & Laderman, S. (2017). The state imperative: Aligning tuition policies with strategies for affordability. Boulder, CO: State Higher Education Executive Officers Association.

    Google Scholar 

  5. Association of American Medical Colleges. (2017a). Coalition letter urges congress to preserve public service loan forgiveness. Accessed 16 Jan 2018 from

  6. Association of American Medical Colleges. (2017b). Medical student education: Debt, costs and loan repayment fact card 2017. Accessed 11 Dec 2017 from

  7. Association of American Medical Colleges. (2017c). Tuition and student fees. Accessed 11 Dec 2017 from

  8. Barid, M., Kofoed, M. S., Miller, T., & Wenger, J. (2018). For-profit higher education responsiveness to price shocks: An investigation of changes to post 9-11 GI bill allowed maximum tuitions. In Working paper.

  9. Baum, S., Ma, J., Pender, M., & Libassi, C. (2018). Trends in student aid. New York, NY: The College Board.

    Google Scholar 

  10. Baum, S., & Steele, P. (2017). The price of graduate and professional school: How much students pay. West Chester, PA: AccessLex Institute.

    Google Scholar 

  11. Baum, S., & Steele, P. (2018). Graduate and professional school debt: How much students borrow. West Chester, PA: AccessLex Institute.

    Google Scholar 

  12. Baumol, W. J. (1967). Macroeconomics of unbalanced growth: The anatomy of urban crisis. American Economic Review,57(3), 415–426.

    Google Scholar 

  13. Bennett, W. J. (1987). Our greedy colleges. The New York Times. Accessed 11 Dec 2017 from

  14. Bhole, M. (2017). Why do federal loans crowd out the private market? Evidence from graduate PLUS loans. In Working paper, Stanford University.

  15. Bowen, H. R. (1980). The costs of higher education: How much do colleges and universities spend per student and how much should they spend?. San Francisco, CA: Jossey-Bass.

    Google Scholar 

  16. Capaldi, E. D., & Abbey, C. W. (2011). Performance and costs in higher education: A proposal for better data. Change: The Magazine of Higher Learning,43(2), 8–15.

    Article  Google Scholar 

  17. Cellini, S. R., & Goldin, C. (2014). Does federal student aid raise tuition? New evidence on for-profit colleges. American Economic Journal: Economic Policy,6(4), 174–206.

    Google Scholar 

  18. Congressional Budget Office. (2017). Baseline projections for selected programs. Accessed 26 Jan 2018 from

  19. de Chaisemartin, C., & D’Haultfoeuille, X. (2018). Fuzzy differences-in-differences. The Review of Economic Studies,85(2), 999–1028.

    Article  Google Scholar 

  20. Delisle, J. (2014). The graduate student debt review. Washington, DC: New America.

    Google Scholar 

  21. Delisle, J. (2016). The coming public service loan forgiveness bonanza. Washington, DC: Brookings Institution Evidence Speaks Reports.

    Google Scholar 

  22. Douglas-Gabriel, D. (2017). GOP higher ed plan would limit student loan forgiveness in repayment program, overhaul federal financial aid. The Washington Post. Accessed 26 Jan 2018 from

  23. Federal Student Aid. (2015). Direct PLUS loans and adverse credit. Accessed 16 Jan 2018 from

  24. Federal Student Aid. (2018). Federal student loan portfolio. Accessed 26 June 2018 from

  25. Federal Student Aid. (n.d.). Income-driven plans. Accessed 16 January 2018 from

  26. (2017). Historical loan limits. Accessed 12 Dec 2017 from

  27. Gillen, A. (2012). Introducing Bennett hypothesis 2.0. Washington, DC: Center for College Affordability and Productivity.

    Google Scholar 

  28. Gladieux, L. E., & Wolanin, T. R. (1976). Congress and the colleges: The national politics of higher education. Lexington, MA: Lexington Books.

    Google Scholar 

  29. González Canché, M. S. (2018). Geographical network analysis and spatial econometrics as tools to enhance our understanding of student migration patterns and benefits in the US higher education network. The Review of Higher Education,41(2), 169–216.

    Article  Google Scholar 

  30. Heller, D. E. (2013). Does federal financial aid drive up college prices?. Washington, DC: American Council on Education.

    Google Scholar 

  31. Jaquette, O., & Parra, E. E. (2014). Using IPEDS data for panel analyses: Core concepts, data challenges, and empirical applications. In M. B. Paulsen (Ed.), Higher education: Handbook of theory and research (Vol 29) (pp. 467–533). Dordrecht, The Netherlands: Springer.

    Google Scholar 

  32. Kelchen, R. (2017). An empirical examination of the Bennett Hypothesis in law school prices. West Chester, PA: AccessLex Institute Research Paper No. 17-09.

  33. Lau, C. V. (2014). The incidence of federal subsidies in for-profit higher education. Job market paper, Northwestern University.

  34. Lucca, D. O., Nadauld, T., & Shen, K. (2015). Credit supply and the rise in college tuition: Evidence from the expansion in federal student aid programs. New York, NY: Federal Reserve Bank of New York Staff Report No. 733.

  35. Ma, J., Baum, S., Pender, M., & Welch, M. (2017). Trends in college pricing 2017. New York, NY: The College Board.

    Google Scholar 

  36. Mora, R., & Reggio, I. (2015). didq: A command for treatment-effect estimation under alternative assumptions. The Stata Journal,15(3), 796–808.

    Article  Google Scholar 

  37. Morse, R., & Hines, K. (2017). Methodology: 2018 best medical school rankings. U.S. News & World Report. Accessed 17 Jan 2018 from

  38. Rizzo, M., & Ehrenberg, R. G. (2004). Resident and nonresident tuition and enrollment at flagship state universities. In C. M. Hoxby (Ed.), College choices: The economics of where to go, when to go, and how to pay for it (pp. 303–349). Chicago, IL: University of Chicago Press.

    Google Scholar 

  39. Shireman, R. (2017). Learn now, pay later: A history of income-contingent student loans in the United States. The ANNALS of the American Academy of Political and Social Science,671, 184–201.

    Article  Google Scholar 

  40. Singell, L. D., Jr., & Stone, J. A. (2007). For whom the Pell tolls: The response of university tuition to federal grants-in-aid. Economics of Education Review,26(3), 285–295.

    Article  Google Scholar 

  41. Stoll, A., Bradley, D. H., & Mahan, S. M. (2014). Overview of the relationship between federal student aid and increases in college price. Washington, DC: Congressional Research Service.

    Google Scholar 

  42. Turner, L. J. (2014). The road to Pell is paved with good intentions: The economic incidence of federal student grant aid. In Working paper.

  43. Wei, C. C., & Skomsvold, P. (2012). Borrowing at the maximum: Undergraduate Stafford loan borrowers in 2007–08. Washington, DC: National Center for Education Statistics.

    Google Scholar 

  44. Woo, J. H., & Shaw, S. (2015). Trends in graduate student financing: Selected years, 1995–1996 to 2011–2012. Washington, DC: National Center for Education Statistics.

    Google Scholar 

Download references


This project was supported by AIR Grant #RG15149 from the AccessLex Institute and the Association for Institutional Research. Any opinions, findings, and conclusions or recommendations expressed in this material are those of the author and do not necessarily reflect the views of the AccessLex Institute or the Association for Institutional Research. I would like to thank Joseph Fresco and Olga Komissarova for their research assistance throughout this project and Dominique Baker, Amy Li, Judith Scott-Clayton, and Douglas Webber for their helpful thoughts in framing this line of research. All errors are my own.

Author information



Corresponding author

Correspondence to Robert Kelchen.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.



See Table 7.

Table 7 Interrupted time series falsification tests using 2005 as adoption of Grad PLUS (instead of 2006)

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Kelchen, R. Does the Bennett Hypothesis Hold in Professional Education? An Empirical Analysis. Res High Educ 61, 357–382 (2020).

Download citation


  • Bennett hypothesis
  • Tuition
  • Student debt
  • Medical schools
  • Business schools