As many, many state universities face reduced funding from state governments, there’s a tendency for these struggling schools to focus on admitting more out-of-state students. College students from out of state pay more money, which looks like a tempting way to close budget gaps. While this can result in awkward rivalries between students, and interesting discussions about university priorities, focusing on out-of-state students might result in a bigger problem for school finances: it might not work.

The Nelson A. Rockefeller Institute of Government at SUNY Albany released a report Monday arguing that increasing nonresident tuition and fees at state schools might not increase total money coming into the university system. Increasing out-of-state tuition could actually reduce enrollment to problematic levels, as far as revenue goes. According to the report:

Prospective students are essentially customers who are going to decide to enroll only if they think the education they will receive is worth the asking price. If the price goes too high, enrollment could drop enough to cancel out the increased revenue per student.

An across-the-board approach to nonresident tuition increases could lead to increased revenues at some campuses, while at other campuses it might decrease revenues, undermine academic quality, and lead to economic losses in the regions where those campuses are located.

The report comes after a 2009 study by the Office of the New York State Comptroller indicated that if the State University of New York (SUNY) increased its nonresident tuition to the national average ($21,333 a year in 2009), it would increase SUNY revenue by $340 million.

Currently, nonresident tuition at the SUNY schools is $12,870 a year. Tuition for New York State residents is $4,970 a year.

The Rockefeller Institute report also suggested that lowering tuition could increase total revenue because it might attract more students.

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer