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We further focus on the US higher education market. Using a two-stage least squares model, we build a macroeconomic model of supply and demand for US higher education as measured by enrollment. We find that college education benefits (e.g. relative earnings and employment levels), credit factors (e.g. student loan amounts and household debt), and financial aid shift demand. Higher tuition prices increase appeal of higher education but credit constraints put a barrier on demand growth. Tuition prices and debt levels are correlated, suggesting that students respond to higher tuition prices by borrowing. School's operating costs, government aid, and tuition and non-tuition revenue drive supply. Schools can use tuition prices to signal quality, and relative demand side price in-elasticity allows them to raise prices.

Finally, we narrow in on individuals. We compare post-college income across differing groups of student ability, school quality, and major choice. We condition on intrinsic student ability based on the quality of the top school to which a student was admitted. We find that attendance at an elite institution increases post-college income. For students not admitted to an elite school, income is primarily driven by student ability and major choice. Students majoring in engineering and business earn higher salaries than students focusing on humanities and arts even after adjusting for ability. School quality plays a key role in the college attendance and school choice decisions, even though we do not find a significant effect of these decisions on post-college earnings in most cases.