PIRS, Affordability and Zellner’s SUR

The Association published an article on December 19, 2012 on PIRS. We have said that among 11 factors that make up the rating, one can summarize them into three groups which are:
a. College Accessibility (point #1 to 4).
b. College Affordability (combine point # 5 and 6) and
c. College Accountability (combine point#7 to 11).
Utilizing publicly available data, the Association has completed the most recent research on PIRS. We utilize Zellner’s Seemingly Unrelated Regression (SUR) econometric analyses to determine various relationships within different groups of variables or metrics. There are 33150 observations in the data set. But, some of the colleges did not consistently make their data available. In other instances, several of them have changed their names. After the process of cleaning, the number of observations dropped significantly. One may think that these observations are randomly available for completing the analyses. They represent broad locations and type of schools in the US. All type (4, 2-year and others) of colleges from the following states are utilized in these analyses ME, MO, MT, ND, NE, NM, OH, TX, VT and WV. As long as the schools have great quality of data, then their information will be used in this study. All variables with monetary unit have been transformed into constant dollar of 2010. Graduation rate and Pell grant variable are a ratio variable. The estimation results on Affordability Equation are shown below:

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One can make many inferences through these econometrics results. For example, the Affordability Model results tell us that the student loans have significant positive relationships with the tuition. As colleges increase their price of taking courses, then students have to take more loans. On the other hand, the amount of student loans are reduced as they receive Pell grant. This statistical evidence shows that the model is in line with the economic logic and this finding has a pretty direct and significant policy implication. Especially in the wake of Pell grant reduction that the US Law Makers have agreed upon. As results, in the near future Uncle Sam will see increases in the country total student loans debts. If we assume the relationship between reduction of $303 million Pell grant and student loans increase is linear, then the existing student loans debts will be added by $303 million from current debts of $1.3 trillion.