Tuition Discounts Lure Students Out of State

Megan Pritchard decided an MBA with an international focus would get her closer to landing her dream job. After managing sales at a winery for almost two years, she wanted to move on to a French company in a U.S. operations function. Because none of the MBA programs in her home state of Alabama offered an international track with a language component, she started looking at private—and more expensive—schools like Tulane and Thunderbird.

Ultimately she enrolled in the business program at the University of South Carolina’s Moore School of Business. Why Moore? In the midst of her MBA search, she learned an exchange agreement between Alabama and South Carolina qualified her for in-state tuition. “It was a huge incentive,” she says of the discounted tuition status, which reduced the cost she would have paid as an out-of-state student by nearly $55,000 over the course of the program. “Without question, I will be able to afford to go to France to look for jobs.”

Such exchange arrangements exist in 46 states and have been around for decades as a way to give students wider access to higher education resources that may not be available in their home states. Several specialized degree programs—ranging from an MBA with a concentration in logistics at the University of Tennessee, Knoxville, to a master’s in hotel administration at the University of Nevada, Las Vegas, to a bachelor’s degree in insurance and risk management at the University of Georgia—are eligible for similar out-of-state tuition discounts based on a student’s residency.

Since the economic downturn hit, the agencies that broker such deals have reported unprecedented use of the programs, as record levels of student loan debt, sharp tuition increases, and the threat of unemployment have prompted more students to seriously consider tuition cost when choosing a degree program.

Rising Trend

In the southern U.S., the number of students who were approved for such discounts increased 30.7 percent to a record high of 2,743 over a three-year period that ended in 2010. That compares with an increase of only 2 percent for the previous three years, according to the Southern Regional Education Board, the nonprofit agency that coordinates exchanges for 16 states stretching from Maryland to Texas. The figures span both graduate and undergraduate programs.

The same trend is true in other regions of the country. Participation spiked 11.7 percent from the 2008-09 school year to the 2010-11 school year across the six New England states, vs. a decline of 3.9 percent in the previous three years, according to the New England Board of Higher Education. Similar trends were reported by organizations covering the Midwest and the Western U.S. “Education and business degrees rank high on program participation,” says Jennifer Dahlquist, chief financial officer of the Midwestern Higher Education Compact, which coordinates the exchanges for nine states in that region.

The rise in interest of cross-border tuition discounts has increased as tuition price has become more of a deciding factor in choosing a degree program. In 2010, 41 percent of students said cost was “very important” in determining where they went to school, up from 36.8 percent in 2007, according to the annual nationwide survey of college freshmen conducted by the Higher Education Research Institute at UCLA. “People are shopping around for price,” says Patrick Callan, president of the Higher Education Policy Institute.

Patterns in California support Callan’s assertion. In-state tuition in the state jumped 21 percent in the 2010-2011 academic year, the sharpest increase anywhere in the country, according to statistics from the College Board. That same year, the number of California residents who went to undergraduate programs out of state using cross-border tuition discounts jumped 34 percent to 7,667, vs. a jump of 12 percent a year earlier, and a total increase of 8 percent for 15 states in the Western U.S.

Huntington Beach (Calif.) resident Corie McGuire said an out-of-state tuition discount, coupled with scholarship money, made the undergraduate finance program at Northern Arizona University more affordable than the in-state programs she looked at. She graduated in 2011 and decided to stay at NAU to get an MBA, which also qualified for a cross-border discount. “It was a huge factor in my decision to go to grad school,” she says.

“Happy Coincidences”

Advertised out-of-state tuition and fees at public four-year institutions increased an average of 5.7 percent to $20,770 this year, vs. a jump of 4.5 percent to $28,500 for private, non-profit institutions and 8.3 percent to $8,244 for in-state institutions, according to College Board statistics.

Virginia resident and undergraduate student Mary Cate McCue enrolled at the University of Georgia before knowing what she wanted to major in. Her sophomore year, she decided to pursue the risk management and insurance track at the university’s Terry College of Business due to the job prospects she thought the major would lead to. McCue qualified for in-state tuition because an equivalent major was not offered at a Virginia state school. “It was a pleasant surprise,” she says.

Cross-border tuition discounts are best suited for these kinds of “happy coincidences,” says Cynthia Bonn, dean of undergraduate admission at the University of Rhode Island. By that she means they are intended for students who are genuinely interested in a specialized degree and find a matching program that qualifies for a discount across state lines. General interest programs, such as the MBA at Northern Arizona, qualify for discounts less often. “It’s not worth majoring in African studies or horticulture studies if you’re not really interested in those disciplines,” she says, referring to students who have falsely declared a major in the past to qualify for a discount.

However, students who have narrowed their interests and are looking out-of-state may find they have more options than they originally thought. Says McCue: “Someone who knows they want to do insurance, or knows they want to go into a certain field, it allows them to expand their college search.”