A State University Arms Race

Many students who aren’t interested in attending a public university in their own state tend to look at state institutions elsewhere.

Choosing public universities outside your border can sometimes be a relative  bargain. In other cases, the price you pay as a nonresident will be exorbitant and comparable to private universities that are stingy with financial aid and/or merit awards.

Not surprisingly, the state schools that typically charge outsiders the most are those that enjoy coveted brand names or are institutions that are located in desirable areas such as near ski slopes. Here are some examples:

  • UCLA
  • University of California, Berkeley
  • University of Michigan
  • College of William and Mary
  • University of Virginia
  • University of Colorado
  • University of Vermont

The schools that I just mentioned, as well as some others, can charge crazy prices because there are plenty of  rich parents here and overseas that will pay whatever price is necessary for their children to obtain bachelor’s degrees at a trophy school.

I wrote an in-depth blog post about this phenomenon last year:

What Nonresidents Need to Know About Attending State Universities

Today I am sharing with you a new report from the New America Foundation that looks closely at the race among public universities to attract affluent outsiders to their states.

arms race

I’d urge you to read the report if public universities beyond your border are on your child’s college lists. Here is the link:

Out-of-State Student Arms Race: How Public Universities Use Merit Aid to Recruit Nonresident Students

In great detail, Stephen Burd, who is a tremendous higher-ed journalist,  documents that state universities are increasingly using merit scholarships to attract affluent outsiders. And this practice is increasing.

In the chart below, you can see in dramatic fashion that the amount of money state universities are devoting to the poorest and richest students are now nearly the same.


Schools with Highest Percentage of Merit Awards

You will find lists in this report that share the percentage of students at state universities that receive merit scholarships. This is not just a phenomenon you’ll see at state flagships, but also at state regional schools.

In this list below, you’ll see the schools that provide the highest percentage of students with merit scholarships at flagships.


Flagships Providing Lowest Percentage of Merit Awards

iliniWhy State Universities Love Rich Students

State universities are attracted to high-income students for a variety of reasons. Here are the main ones:

Rich students bring in more revenue.

You can charge outsiders considerably more money and this cash is welcome since state governments are failing to  support their public universities as they did before the recession that started in late 2007.

They help with rankings.

Just like their private peers, state universities are obsessed with inching up in the ratings and attracting smart, affluent students can help with that effort. In their admission processes, state schools focus almost entirely on test scores, GPA and sometimes class rank. These are among the admission factors that U.S. News cares about.

They need to attract rich students to ward off poachers.

If state universities don’t lock down their own brightest students with merit awards, they could find these teenagers swooped up by competing public universities elsewhere. I wrote about this phenomenon in a recent CBS MoneyWatch post.

For example, in the report Burd noted how the University of Missouri in Columbia (my alma mater) felt it had to react after admission representatives from the Universities of Alabama, Arkansas, Kentucky, Mississippi and Minnesota began aggressively recruiting in the state.

After losing out on high-achieving students that would have normally enrolled at Mizzou, the school significantly boosted its merit aid to higher-income Missourians and nonresidents. It also began poaching Illinois residents who might have normally have attended the University of Illinois, Urbana-Champaign. Now 20% of students at Mizzou are Illinois residents. University of Iowa and Indiana University have also been aggressive in recruiting Illinois teenagers.

Who Suffers From This Policy

The chase for high-income students, the report notes, is bad news for other students. State universities that dispense a lot of merit scholarships tend to serve a smaller percentage of disadvantaged students.

At universities that are aggressive with merit aid, Pell Grant students (awarded to low and middle-income families) represent 32% of the student body. In contrast, at schools that award less merit aid, Pell Grant students represent 42% of the student bodies.

As the report notes, “In bringing in more and more wealthy nonresident students, these colleges are increasingly becoming bastions of privilege.”

Learn More:

I’ve opened up registration for my latest online course – The College Cost Lab – that will explain how parents can aaa collegecut the cost of college.

Enroll early and you’ll get my new guide, The Ultimate List of the Nation’s Most Generous Colleges. – Lynn O’Shaughnessy









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3 Responses to A State University Arms Race

  1. Susan August 4, 2015 at 9:42 pm #

    “Bastions of Priveledge…?” ugggghhhhh!!!! My husband and I have worked hard to provide for our family of 5 and hope to retire in some level of earned comfort after our kids fulfill our expectations of graduating from college, and providing for themselves. Based on the EFC calculators at most every institution we have run, our family is expected to pay their full tuition. If we did that for all of our children it would dip way into our retirement.

    It seems perfectly reasonable that some opportunities exist for our kids to receive merit scholarships just like their hard working peers from low EFC families. Like many students from the “low and middle” income families, our kids are expected to make their own way and create opportunities for themselves. What is unpalatable to us is the idea that Colleges and Universities only assist the “needy student” based on their parents financial profile, and then with no limit to the cost ask the rest of us to foot the bill for their ridiculously priced institutions.

    Kids, whose parents “could afford” to pay the full tuition but refuse on principle or an unwillingness to let the University decide what their families EFC should be, should be given the chance to attend based on their own merit. Our family might then consider paying the rest, knowing our kids earned their way, and we aren’t the loser in the financial tug of war.

  2. Marie July 4, 2015 at 7:52 pm #

    The OOS public universities have caught our attention. Based on ACT/SAT scores, GPA, and PSAT scores it looks like my son will have several options for full tuition waivers. Each package comes with a set of strings attached, of course, and we’ll look those over carefully when the time comes and take it from there.

    Our initial running of the Net Price Calculator for his long list of schools to apply to this fall have all the OOS public universities offering automatic merit scholarships beating the private schools’ need-based aid.

    He is finding himself considering schools we never thought would be on the radar. A big attraction, along with the idea of graduating debt-free or nearly debt-free, is the Honors Colleges many of these schools have.

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