[Excerpt] The recent economic downturn in the United States has led to severe current and projected budget deficits in most states. Sharp rises in healthcare costs and increased competition for state funds from other sources has concurrently led to a decrease in the shares of state budgets earmarked for the higher education sector.1 Because universities are able to attract revenue from other sources (e.g. tuition, annual giving and federal student aid) and they are a discretionary component of most state budgets, they are often the first to go under the knife during tough times. The resulting revenue shortages from these budget cuts will most certainly have deleterious effects on college accessibility and on the behavior of these higher educational institutions. Inasmuch as 65% of the 9.2 million students enrolled in four-year institutions in 1999 were enrolled in public institutions and in most states the major public research universities are also the most selective in terms of admissions, it is important to understand institutional responses relating to tuition and enrollment policies, as well as the likely changes in state grant aid policies.
How tuition levels, or the availability of grant or loan aid, influence access are empirical questions that we will not address in this chapter. Rather, we will analyze how tuition and enrollment strategies at institutions react to changes in federal and state student need based aid and to state appropriations to public higher education institutions. The former increases student mobility by expanding their choice set, while the latter does not travel with the student.