In Defense of Out-of-State Students

There are reasons to value foreign and out-of-state students over and above the tuition revenue they bring in.

There are reasons to value foreign and out-of-state students over and above the tuition revenue they bring in.

As recently as the 1990s, the Commonwealth of Virginia did something that would be considered unthinkable in today’s political environment — it subsidized 25% of the tuition of out-of-state students enrolled in Virginia’s public colleges and universities. Legislators believed there was a value to attracting bright young people to the Old Dominion.

In two-and-a-half decades, says Peter Blake, director of the State Council of Higher Education for Virginia (SCHEV), public policy has done a U-turn: Now legislators demand that out-of-state students underwrite the education of Virginians. Students from beyond the state line pay in tuition about 160% of what it costs to educate them.

The treatment of out-of-state students has always been a prickly public policy issue, especially at Virginia’s elite, highly selective universities that turn away many Virginians. Every slot given to an outsider is one less for a Virginian. As tuition at state institutions of higher education has ratcheted ever higher over the years, making the cost of college increasingly burdensome, out-of-staters are valued for the revenue they generate.

But there are non-pecuniary reasons for recruiting non-Virginia talent. Students from other parts of the country and even overseas bring diverse perspectives that enrich the educational experience of home-grown students — what economists call the “peer” effect. They also tend to have higher SAT scores, which boosts the average SATs for the student body, lending prestige to an institution.

And now they bring in more tuition revenue than they cost. Indeed the impulse to recruit out-of-state students is so strong that universities reduce tuition through the back door — by providing financial aid to lower income students — to entice less-affluent students. The average amount of aid granted to out-of-staters exceeds the average amount awarded to in-state students at every public four-year institution by a wide margin, inspiring bills in the General Assembly to cap or limit that aid in the hope of providing tuition relief for Virginians. State law already prohibits colleges from using revenue from in-state tuition to fund aid to out-of-staters, but measures proposed (but not yet passed) by the legislature would enact even tighter limits.

The logic for capping aid to out-of-state students is self-evident: It would free up resources to make higher education more affordable for Virginians. (I discussed this issue in the previous post.)

Reasons for supporting financial aid to out-of-staters are more subtle. Think of higher education as an industry and degrees as a product, suggests Blake. “Higher ed is a great export product.” Out-of-state students pump money into the Virginia economy.

Another advantage is that many out-of-state students stay in Virginia. Some 20% stick around at least 18 months, according to a study conducted several years ago. Higher ed is a great tool for recruiting human capital to the state, says Blake. “Virginia’s economy doesn’t end at the border.”

Virginia is part of a complex, inter-connected national economy, adds Tod Massa, SCHEV research director. “We can’t think strictly in isolationist terms.”

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3 responses to “In Defense of Out-of-State Students

  1. ” Reasons for supporting financial aid to out-of-staters are more subtle. Think of higher education as an industry and degrees as a product, suggests Blake. “Higher ed is a great export product.” Out-of-state students pump money into the Virginia economy.”

    Do Va taxpayers actually provide financial aid or subsidies to out of state students?

  2. No, Virginia taxpayers do not provide financial aid or subsidies for out-of-state students. Neither does tuition from in-state students go to out-of-state financial aid. As I understand it, tuition collected from out-of-state students can be applied to financial aid for other out-of-state students, and endowment scholarship money can go to out-of-state students.

  3. I think so much of the Albo legislation and the like is about as backwards looking as we can get as a Commonwealth. I want the absolute best minds to go to school here, and I really want them to stay here after school. The “25% cap” and other nonsense is just protectionism by another name. Virginia should embrace the best minds wherever they come from. If you support the Albo bill or Petersen’s legislation, you’re definitely a Trumpster…looking backwards with a very protectionist, parochial view of the world that no longer makes sense. Embrace the best and hopefully our Commonwealth will flourish!

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