How Public Colleges use merit aid to compete in the out-of-state student arms race



The University of Alabama’s dominance on the football field is legendary. The Crimson Tide’s success comes from aggressive recruiting around the country. Last year’s recruiting class included 27 players from 15 states, many of whom were four- or five-star prospects.

What most people don’t know is that the University of Alabama takes the same intense approach when recruiting top out-of-state students. The school has at least 30 full-time admissions officers spread throughout the country. And they come armed with generous merit-based scholarship packages to lure high-achieving students to their school.

Today there are more out-of-state students on the campus than in-state ones—a strategy that has helped the school weather significant state budget cuts. Admissions officers at several public universities in different parts of the country said in interviews recently that Alabama has been actively recruiting in their home states. “Alabama has recruiters everywhere,” a top official from a competing public flagship university told me. “It’s really played well for them.”

The University of Alabama is not alone in its aggressive pursuit of out-of-state students. Over the past two decades, there has been a fundamental shift in the admissions practices of many public four-year colleges and universities. Stung by sharp state budget cuts at the same time they are seeking greater prestige, these universities are increasingly pitted against one another, fiercely competing for the students they most desire: the best and brightest, and those wealthy enough to pay full freight. And they are using a large share of their institutional aid—money that instead could go to students who truly need it—to entice these generally privileged students to their schools.

New America is releasing a report today that I authored, “The Out-Of-State Student Arms Race: How Public Universities Use Merit Aid to Recruit Nonresident Students,” which examines the use of non-need-based aid at 424 public four-year colleges and universities across the country. The analysis finds that about seven out of every 10 of the public institutions examined provide non-need-based aid to at least 5 percent of their freshmen each year. Nearly half provide non-need-based aid to at least 10 percent of their freshmen, and almost one in five provides this assistance to at least 20 percent of their freshmen annually. The study reveals that this practice is not limited to the flagships and major research universities. In recent years, many regional colleges and universities have found themselves caught up in the competition as well.

Using data that colleges disclose to the magazines that rank them, I was able to identify the public colleges that are the biggest players in this merit aid arms race and describe the factors that have led to what has become a widespread and entrenched practice.

In addition, I found the following:

  • Public colleges that provide substantial amounts of merit aid tend to enroll more out-of-state students than those that provide little of this aid;
  • Public colleges that provide substantial amounts of merit aid have experienced a larger drop in the enrollment of in-state freshmen since 2000 than those that provide less;
  • Public colleges that provide substantial amounts of merit aid tend to enroll fewer students with Pell Grants and charge low-income students a higher average net price, the amount of money that students and their families must pay after all grant and scholarship aid is deducted from the listed price, than those that provide little of this aid.

For generations, public colleges and universities provided a low-cost higher education to students in their home states. Those that awarded institutional aid mostly gave it to students with the greatest financial need. As a result of such policies, these institutions offered students from low- and moderate-income families a gateway to the middle class.

But over the last 20 years, state disinvestment and institutional status-seeking have worked together, hand in hand, to encourage public colleges and universities to adopt the enrollment tactics of their private-college counterparts. For many of these schools, that has meant using their institutional aid dollars strategically to lure affluent out-of-state students to their campuses in order to climb up the rankings and increase their revenues.

This is not to say that public colleges and universities aren’t providing merit aid to in-state students. They provide non-need-based aid to top students in their home states as well. In this way, public institutions are using merit aid for both offensive and defensive purposes. They are aggressively seeking affluent and high-achieving students out of state, while trying to stop other institutions from wooing their best home-state students, who help them in the rankings.

Public institutions initially began competing for affluent out-of-state students to make up for state budget cuts and to climb up the rankings, but now the competition itself is a driving force. Regional public schools that for decades have served five or 10 counties are now increasingly being swept up in it, too.

“The level of competition is creating a prisoner’s dilemma,” Donald Hossler, director of the Center for Postsecondary Research at Indiana University-Bloomington, said in an interview. “Some schools are doing this not because they want to, but because their peers are. They feel they can’t afford not to do it.”

These practices may end up harming the schools involved, as they continue ratcheting up the amount of merit aid they award to keep up with their competitors. There’s only so far they can go before the costs of these policies start to outweigh the benefits.

Low-income and working-class students appear to be paying the highest price for these policies. As public colleges and universities bring in more and more affluent out-of-state students, less institutional aid and fewer seats are available to in-state students who come from less-privileged backgrounds

Somewhere, Justin Morrill—whose legislation during the Civil War laid the groundwork for U.S. public higher education—is turning over in his grave.