Socio-economic status and enrollment in higher education: do costs matter?

We study the impact of socio-economic status on enrollment and study decisions in higher education. We use a discrete choice approach to distinguish between three channels. First, students from disadvantaged backgrounds may be more sensitive to the costs of education. Second, they may have lower preferences for education. Third, they may have developed less academic ability during previous schooling and are therefore less likely to participate. We apply our analysis to Flanders, where tuition fees are low and all high school graduates have access to higher education. We control for unobserved heterogeneity and find that preferences and (acquired) ability are more important than cost sensitivity in explaining the lower enrollment of disadvantaged students. Finally, we use the cost sensitivity channel to simulate the impact of tuition fee increases. We find that a uniform tuition fee increase has a fairly small impact on total enrollment, but it especially reduces enrollment of socially disadvantaged students. An alternative discriminatory policy, which combines a higher tuition fee increase for advantaged students with a lower tuition fee increase for disadvantaged students, can be superior: it generates the same budgetary savings, has a lower impact on total enrollment and reduces the participation gap of disadvantaged students.