School

One of Higher Ed’s Worst-Kept Secrets Is Out. It’s Even Grimmer Than We Knew.

Out-of-state students are funding flagship universities—and piling up debt in the process.

A sign introducing the University of Alabama is seen in front of a tall bell tower.
A view of the Denny Chimes at the University of Alabama in Tuscaloosa on Sept. 7, 2012. Photo by Lance King/Replay Photos via Getty Images

Imagine you need a service that your home state (State A) provides to its residents, but only in a limited capacity. State A requires individuals to meet certain criteria to qualify for access to this service.

Unfortunately, your home state says you do not qualify.

Fortunately, State B, which, for all practical purposes, provides an identical service, says you do qualify. The only rub is that because you live in State A, State B is going to charge you three times more.

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Sound good?

Welcome to “The Great Student Swap,” also the title of a recently released report by Aaron Klein of the Brookings Institute, which looks at the phenomenon of declining in-state enrollment at state “flagship” institutions (the public institutions at the top of the food chain in a given state—your University of Illinois/Delaware/Michigan/Wisconsin).

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Mining information from the Integrated Postsecondary Education Data System, specifically from 2002 through 2018, Klein finds that 48 out of 50 state flagships have seen an increase in the share of out-of-state students during that time period, in some cases by more than 50 percent.

Or lots more than 50 percent. In 2002, the University of Alabama had an in-state–to–out-of-state ratio of roughly 75–25. By 2018, that ratio had almost flipped, to 34–66, the equivalent of a 180 percent increase in out-of-state students.

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On the one hand, we could praise Alabama for leveraging its juggernaut football team, a viral-on-TikTok sorority rush culture, and an early-mover strategy on social media to grab more student interest and become a nationally competitive university that attracts lots of out-of-state applicants.

On the other hand, we should know that winning at this competition comes at a cost.

One of those costs is financial, falling to the students themselves. For example, the hundreds of students per year who leave Illinois to attend an out-of-state public school like the University of Alabama are looking at a sticker price double what they would pay for an in-state university, potentially accruing an additional $60,000 in tuition costs for a four-year degree.

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Klein did a subanalysis of 16 of the 50 state flagships and found that the out-of-state students in his sample who attended school from 2002 to 2018 paid an additional $57 billion in total tuition, compared with what they might have paid in state.

But of course, this isn’t only a flagship university phenomenon. Lots of states have multiple large universities that are almost interchangeable with the flagship. South Carolina has the University of South Carolina and also Clemson. Virginia has UVA and Virginia Tech. Michigan has the University of Michigan and Michigan State. Alabama has not just the flagship state school but also Auburn University.

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Many of these quasi-flagships are seeing similar shifts in the proportion of out-of-state students. Clemson University’s freshman classes are now essentially 50-50 in-state–out-of-state. Purdue University is not Indiana’s flagship university, but it has a larger undergraduate population than Indiana University, and only 45 percent of these students are Indiana residents.

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On his personal blog, Higher Ed Data Stories, Jon Boeckenstedt, who serves as vice provost of enrollment at Oregon State University, has used the IPEDS data to compile the big picture on freshman enrollment and migration, providing a number of different visualizations to look at this phenomenon on a large scale, beyond the flagships.

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Based on (pre-pandemic) 2018 data, California exported the largest number of students to other states (over 36,000), followed by Illinois (32,000) and New Jersey (31,000). California has a ton of higher education capacity, but it still isn’t sufficient to serve the number of students who want to pursue a post-secondary credential in a large university setting.

But while the number of migrating students coming from California is high, the state ranks only 35th in terms of percentage of students who leave for college. Illinois and New Jersey, on the other hand, have an undersupply of the “big university” slots for students looking for that kind of experience. The University of Illinois–Chicago campus serves almost as many undergrads as the flagship University of Illinois–Urbana-Champaign, located in central Illinois. But even though they’re both large Research I universities, these two schools are rarely in the same consideration sets for students because of the differences in setting and atmosphere.

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Students from Illinois who do not quite clear the bar for the state flagship wind up in places like the University of Alabama, or the University of Iowa, schools that are happy to take generally well-prepared students from other states. In a recent year, 700 students from Illinois who attended Alabama had GPAs above 3.5, qualifying them for the president and dean’s lists.

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I have no evidence that administrators from the University of Alabama stand at the Illinois state line declaring “I drink your milkshake!” Daniel Plainview–style, but in addition to those nice GPAs, those out-of-state students come coupled with that sweet, sweet extra tuition revenue.

As to why this is happening on a national scale, the reason is indeed that sweet, sweet tuition revenue. As current University of California chancellor Carol Christ said in a 2016 interview (when she was interim executive vice chancellor and provost), “Colleges and universities are fundamentally in the business of enrolling students for tuition dollars.”

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It’s tempting to say that this is a “quiet part out loud” moment, except that there’s been nothing quiet about it. Public universities need money to operate, and the largest share of the funding comes from student tuition. The only way to boost the bottom line is to enroll more students who pay more. The state of Alabama provides just over 10 percent of the university’s budget. The money has to come from somewhere.

As Boeckenstedt told me: “In the face of decreased state funding, colleges and universities have had to look for other sources of revenue to balance the budget. It’s obvious to anyone who has done admissions work for a month that students who are thinking about and are willing to cross state lines are generally from more affluent families and have greater capacity to pay higher, nonresident tuition rates.”

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Essentially, families who can afford the cost of increased tuition that comes with going out of state without needing loans can find that big-school option they’re looking for. Schools maximize how much they can extract from these families through aggressive marketing and enrollment management strategies that first attract attention, and then model how much these parents might be willing to pay.

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(For more on this see Kevin Carey’s Slate piece: “The Single Most Important Thing to Know About Financial Aid: It’s a Sham.”)

This practice also increases the rankings and prestige of the institutions that lure more out-of-state students, mostly because those rankings are really just a proxy for institutional wealth and the wealth of the students who enroll. Having taught at three R1 universities (Clemson, University of Illinois, and Virginia Tech), I can testify to what everyone working in higher ed well knows: When it comes to the quality of the educational experience, there is not a dime’s worth of difference between these schools.

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Unfortunately, allowing a huge chunk of the public higher ed landscape to act like a competitive market—where the goal is to maximize revenue—drives up the aggregate cost for everyone, and is particularly damaging for low-income students, including those who stay in-state for college.

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In a 2018 report for New America, “Undermining Pell: Volume IV—How the Privatization of Public Higher Education Is Hurting Low-Income Students,” Stephen Burd calculated that the percentage of schools with an average net price (costs after grants and scholarships are deducted from fees) of above $10,000 (inflation-adjusted) increased from 34 percent to 52 percent from 2010 through 2015.

Some schools have become what Burd calls “Country-Club Public Universities,” schools that maintain low net price for in-state students (under $10,000) but at the same time enroll a low percentage (under 15 percent) of Pell Grant eligible students. These schools primarily serve the already wealthy, often using merit aid—rather than need-based aid—to retain top students from their state.

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Then there are schools like Alabama, which maintains a high net price while also serving a lower percentage of Pell-eligible students (19 percent).

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The schools that enroll very high percentages of Pell Grant recipients and have low net prices are regional universities like University of Arkansas–Pine Bluff, or Savannah State, as well as numerous branches of the Cal State system and New York’s CUNY and SUNY networks. These schools are chronically cash-strapped but also know what students they serve, and realize that competing on prestige would be essentially turning their backs on those students. The only winning (more like surviving) move for these institutions is not to play.

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But as Laura T. Hamilton and Kelly Nielsen show in their book, Broke: The Racial Consequences of Underfunding Public Universities, even those institutions that don’t play the game are harmed by the very existence of the game, as the increasing privatization of the public university system leaves less for those institutions that enroll significant numbers of less-affluent students.

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While, on an annual basis, state funding for higher education is up somewhat—including some one-time pandemic assistance funds—it does not come close to covering the increased costs of university operations. Consider the increased costs of health care alone, and then imagine what that looks like for an organization with thousands of employees.

If the goal of a public system of higher education is to provide access to opportunity and advancement to qualified students in an efficient and cost-effective way, we almost could not do worse than the current status quo. A system that requires institutions to be “fundamentally in the business of enrolling students for tuition dollars,” which means chasing the shrinking number of students who are willing to pay full freight for the university experience, funnels money away from the missions of teaching and learning and research and toward marketing, recruiting, and financializing the student body, treating those wealthy students like ATMs.

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As to what works to reduce the swapping of students from state to state, Brookings’ Klein looks at a few possibilities. One is to do as North Carolina’s public system does and strictly cap the percentage of out-of-state freshman students at all public universities at 18 percent.

Boeckenstedt is skeptical that this is a good move for all states, however, pointing out that states that may be losing population will be hamstrung by dedicated percentages if there simply aren’t enough in-state students to fill the quota. This has been the experience for North Carolina’s HCBUs, which were allowed to increase their percentage of out-of-state students in order to fill their freshman classes.

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At Oregon State, where Boeckenstedt works, there’s a policy of first admitting all qualified in-state applicants before filling the class with out-of-staters. This gives OSU a student population a little under 30 percent out-of-state, versus almost 50 percent out-of-state for the flagship University of Oregon.

More states could also engage in reciprocity agreements with neighboring states, as Minnesota does with the Dakotas and Wisconsin, states where, as Boeckenstedt points out, some residents of one state may be located much geographically closer to a public university in another state.

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But really, this is all nibbling at the edges of the problem, trying to find ways to constrain the competition for student tuition dollars, which is what drives up the price. It does nothing to solve the funding needs of institutions, and it essentially enshrines a status quo of a small handful of have-enoughs along with a much larger group of have-nots.

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Really, “The Great Student Swap” is simply another symptom of the same disease that allowed the student loan debt crisis to take such a tenacious hold. We have a system that is rigged against those who do not already have the money to go to college, which is a higher and higher percentage of students every year.

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The only long-term solution is to fund these public institutions with public money from the federal government, combined with contributions from the state, and tie that money to requirements to admit all qualified residential applicants. Over time, this may even create an incentive for states to increase their own funding as they return to serving more of their own people. There isn’t comprehensive data yet on what percentage of out-of-state students ultimately make the state where they went to college a permanent home, but it seems likely that all those students from Illinois will be heading back home, visiting Tuscaloosa for only the occasional football weekend. Inviting four-year carpetbaggers to come in and enjoy the fruits of your top university may be good for the handful of schools that can play this kind of game, but it’s a lousy way to build a sustainable system for lots of students, and it does nothing long-term for the broader health of the state where the university is located.

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Some of the so-called public Ivies, like UVA and the University of Michigan, that charge Ivy-like tuition to out-of-state students (in excess of $50,000 a year), may eschew additional federal money and decide to keep competing for those high-paying students, but the University of Arkansas–Pine Bluffs and Savannah States of the world could get on with the mission we claim to believe in for higher education: providing access to an opportunity for a more prosperous future.

Until we change the nature of the game, the vast majority of us are going to keep losing.

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