Is the Pell Still Tolling? An Analysis of the Bennett Hypothesis and the Pell Grant 12 Years Later

Abstract

In 1987, Secretary of Education William J. Bennett promoted a theory that has become known as the Bennett Hypothesis. In the years since then, scholars have studied his idea to see if the theory is correct and if universities raise tuition as federal aid for higher education increases. Using 1,551 universities from 2008 to 2016, I analyze whether increases in the average Pell Grant per student result in higher sticker price tuition at four types of universities. I find that the Bennett Hypothesis does not hold up at for-profit universities nor for in-state students at public universities. However, there is strong evidence of the Bennett Hypothesis for private non-profit universities and for out-of-state students at public universities. These results indicate that public universities act like private institutions when considering out-of-state students and that these types of universities are using increases in federal aid as a means to increase their own tuition.