A Losing Strategy?

Looking to out-of-state students to close budget gaps backfires for some public colleges

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Chart: Trends in average tuition and fees at public four-year institutions

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By ANNE K. WALTERS

Veronica Woodlief has always wanted to study marine biology but is not too enthusiastic about the landlocked programs offered by colleges in her home state, Pennsylvania.

She wants to attend the University of North Carolina at Wilmington. But it charges out-of-state students about $13,600 annually in tuition and fees — more than three and a half times what it charges in-state students, and more than she can afford. Instead of applying there directly from high school in 2003, she chose to work after graduation to save enough money to move to North Carolina and establish residency. She settled there last spring and hopes to take introductory classes at a local community college and transfer to Wilmington in the fall of 2007.

Whether students like Ms. Woodlief will be able to afford going to public colleges out of state is something that more policy makers will have to consider, as out-of-state tuition — on which some institutions rely — rises beyond many students' reach.

Like Ms. Woodlief, many students are daunted by the rising cost of attending a public college in another state. At many colleges, out-of-state tuition is so high that growing numbers of students are staying away. As a result, in states like Florida and Colorado, the number of out-of-state students has been falling. And colleges in other states, from North Carolina to Wisconsin, are now being forced to ask whether high out-of-state tuition is keeping students away.

State appropriations often fail to keep up with the growth of colleges' budgets, forcing the institutions to raise tuition to fill budget gaps. But lawmakers and college officials are usually under pressure to hold down tuition for state residents, so they look to students from elsewhere to bear a greater share of higher-education costs.

Increasing tuition for out-of-state students can backfire, however. If too many of those students look elsewhere, colleges could be left with even less tuition revenue than before the raises were put in place.

Colleges' "ability to keep spiking prices is really becoming limited," says Travis J. Reindl, director of state policy analysis for the American Association of State Colleges and Universities. "In a growing number of states, they are reaching a point of diminishing returns."

Cash Cows

The annual tuition and fees for out-of-state students at four-year public colleges, on average, is $13,164, compared with an average of $5,491 for in-state students, according to the College Board, a difference of $7,673. Ten years ago, the difference between tuition for residents and nonresidents was about $4,500.

Because out-of-state students pay so much more, attracting them can mean a significant infusion of cash for colleges, while losing them can leave colleges in the position of having to attract many more in-state students to make up for the lost revenue.

Some higher-education officials worry that the rising cost of nonresident tuition is leaving public colleges less economically diverse. "If mobility is tied to socioeconomic ability, fewer and fewer lower- and middle-income students will be able to go to a different state," says John Barnhill, director of admissions and records at Florida State University. Most students who can afford to attend an out-of-state public college can afford to attend a private institution instead, he notes.

The $21,900 that the University of Colorado at Boulder charges most nonresident undergraduates is about what they would pay at many private institutions. Officials say the university uses money from those students to subsidize tuition for in-state students, who pay about $4,400, and to make up for shortfalls in state funds.

In the 2004 fiscal year, the 32 percent of undergraduates who came from other states provided two-thirds of the university's tuition revenue.

The practice is already hurting the university in the market. Last fall the institution enrolled 6.5 percent fewer out-of-state undergraduates than in the previous year — and 12 percent fewer freshmen. While bad publicity from a series of recent scandals may account for some of the downturn, officials there attribute most of the decrease to cost. To reverse the trend, the university has started to guarantee out-of-state undergraduates the same tuition for four years, and has set up a merit-scholarship program specifically for out-of-state applicants.

Other public universities in Colorado have also seen downturns in enrollments from beyond state borders. At Colorado State University, which has about 500 fewer out-of-state students than it did a decade ago, the out-of-state tuition is actually a better bargain than it was then, says Tony Frank, provost and senior vice president. But, he says, prospective students probably don't look at it that way: "As out-of-state tuition goes up, they say, Why not pay and attend a private?"

When low state appropriations force colleges to look to nonresident students to balance their books, access for in-state students can suffer.

"It's pretty hard to fulfill the public mission to educate the citizens of your state if all the economics are pointing you to educate the students of other states," observes P. Kay Norton, president of the University of Northern Colorado.

Diversity Threat

In Florida out-of-state tuition at public colleges increased by 64 percent from 2000 to 2006, and public universities began seeing drops in their enrollments of out-of-state undergraduates starting in 2002. The state's public universities have lost more than 2,800 out-of-state students since the fall of 2001, when such enrollments peaked. All but two of the state's 11 public universities have experienced declines in their out-of-state enrollments this year.

Florida higher-education officials say there are other factors besides tuition that have contributed to such enrollment declines. Among the other factors they blame are the attacks of September 11, 2001, which led to stricter immigration policies and a decline in foreign-student enrollments, and the increase in scholarships in nearby states, such as Georgia, designed to entice students to attend college closer to home.

Florida is a fast-growing state, and large jumps in the number of state residents attending its public colleges have helped to make up for the decrease in out-of-state students, says Mark Rosenberg, chancellor of the state university system. He declined to quantify how many in-state students would be required to make up for the drop in out-of-state students, who pay nearly five times as much in tuition as residents pay.

The drop in out-of-state students concerns Mr. Rosenberg because it makes his campuses less diverse. The number of black freshmen enrolling in the public-university system dropped sharply this year, and system administrators who investigated the numbers blamed the decline solely on the large number of black students from other states staying away from Florida. This month, Gov. Jeb Bush announced a multi-pronged effort to increase minority enrollment in the system, but its focus, so far, has been only on Floridians.

Size Helps

In most states, big-name flagship campuses seldom have trouble attracting students from elsewhere. When tuition for out-of-state students climbs, it is usually the smaller, lesser-known campuses that suffer.

The University of North Carolina System's out-of-state enrollments have climbed, but the growth is driven almost entirely by increases on its main campuses, at Chapel Hill and North Carolina State University. Elsewhere in the system, Appalachian State University enrolled 13 percent fewer out-of-state students last fall than a year before, and lost 100 out-of-state students who had attended the previous year. Some of those students may have decided to transfer to cheaper colleges in their home states or to work in North Carolina to gain residency so they can pay less in tuition, says Harry L. Williams, associate vice chancellor for diversity and acting associate vice chancellor for enrollment services. Appalachian State's out-of-state tuition is $17,000 compared with $7,000 for in-state students.

University officials are trying to offer out-of-state students more support to keep them on the campus, but unlike their counterparts at private colleges, can do little to adjust the price that individual students pay.

Even on the system's most popular campuses, such as Chapel Hill, out-of-state students feel burdened. That campus's Out of State Student Association has collected several hundred signatures on an online petition to make tuition increases more predictable.

Joy Kasaaian, a senior at Chapel Hill and president of the association, argues that while it is understandable that taxpayers in a state should be charged lower tuition, it is unfair for public colleges to substantially raise the tuition of students who have already enrolled. She characterizes the system's attitude toward out-of-state students as, "How much can we get out of them for them to still come here?"

But not all states are turning to out-of-state students to provide an extra revenue boost. Some states, like those in the upper Midwest, need those students to fill seats, and university officials are looking to lure out-of-state students with low tuition to make up for predicted shortfalls in the number of in-state students over the next decade.

First-time freshmen and transfer students will pay $114.55 per credit hour at South Dakota public colleges this fall, down from the current rate of $242.60. The goal is to increase the number of students by 194 and prevent a projected $1-million revenue shortage, says Robert T. Tad Perry, executive director of the state's Board of Regents.

TRENDS IN AVERAGE TUITION AND FEES AT PUBLIC 4-YEAR INSTITUTIONS In dollar terms, the gap between in-state and out-of-state tuition has grown substantially over the past decade. SOURCE: The College Board