U tuition bargain gets review

For students from states like Illinois, Iowa and Texas, the University of Minnesota is a deal.

Too good a deal, some now believe.

The university dropped its nonresident tuition four years ago to attract more undergraduates from elsewhere. It is now the cheapest school in the Big Ten for those students.

New leaders at the U, surprised by the slim gap between in-state and out-of-state sticker prices, are wondering whether that's fair to Minnesota residents, who have seen their tuition double over the past decade -- or smart for a university hunting for new revenue as state funding has fallen.

Reducing the out-of-state price "has put us in a place where we have a good, robust population of out-of-state students," university President Eric Kaler said. "It's probably -- certainly -- time to look carefully at where we are in that out-of-state price point and whether we should grow that."

The share of affected students on the Twin Cities campus -- those from other countries or states without tuition reciprocity agreements -- has swelled since 2007 from 7.7 percent to 17.2 percent. Meanwhile, the percentage of resident students dipped slightly, while the number and share of students from reciprocity states such as Wisconsin shrank.

The university charges tuition and fees of $18,774 for out-of-state and international undergraduates, and $13,524 for in-state. In contrast, the University of Wisconsin charges $26,628 for nonresidents and $10,379 for residents. In the Big Ten, nonresident tuition and fees averages $29,328. Minnesota is the cheapest of those dozen schools. But when it comes to residents, Minnesota is the group's fourth-most-expensive.

For years, Bill Gleason, an associate professor at the U, has been arguing that the strategy causes the university to miss out on tens of millions in revenue each year -- "and that's not chump change."

"I think it's fair to say the University of Minnesota should be charging at least the average delta in the Big Ten," Gleason said. "Why are we giving this away?"

Before making any big moves, Kaler said, the university needs to study how sensitive out-of-state students are to price.

"You don't want to make it so expensive that no out-of-state student chooses to come," Kaler said, "nor do you want to make it so remarkably inexpensive that Minnesota students feel like they're subsidizing out-of-state students."

Moreover, one can't assume that any tuition increase would result in pure profit, said Robert McMaster, vice provost and dean of undergraduate education. "To get those students to the university, at least initially, you're going to have to put new financial aid on the table through scholarships and waivers."

The U is an outlier

Across the country, public universities have been recruiting more aggressively across their borders, hungry for the bigger tuition payments from those students. But the University of Minnesota was "something of an outlier," in lowering its tuition, said Patrick Callan, president of the Higher Education Policy Institute.

From 2007 to 2012, the U had the biggest drop in published price for out-of-state students of any flagship university in the country, according to an October report by the College Board.

Callan said it makes sense that the university would consider raising out-of-state tuition to what the market will bear, but he added that doing so would be "just one more thing that stacks the higher education deck in favor of high-income students.

"Even though you might still get a certain kind of diversity in terms of people from other places," he said, "you might be losing a certain amount of economic diversity."

The university decreased nonresident tuition in 2008, so that out-of-state and international students would pay only $4,000 more than residents, a gap that has grown slightly since. Former U President Robert Bruininks said then that the plan would keep university enrollment up despite an expected drop in the number of high school graduates in the Midwest.

Since then, the number of students from states without reciprocity agreements with Minnesota has more than doubled.

"This has been a huge plus for our office of admissions," McMaster said.

Regents weigh in

Despite the growth in out-of-state students, the number of in-state undergraduates at the U has stayed steady, partly because the total undergraduate population has grown.

Kaler said his goal is to keep the share of Minnesotans around 70 percent, about where it is now, while further growing the slice of out-of-state students.

"I would expect to see that mix change again over time," he said, "bringing more U.S. out-of-state students, probably, perhaps at the expense of reciprocity students."

The university focuses its scholarships and grants on Minnesota residents, McMaster said at a Board of Regents meeting this month. The net price that in-state students pay after subtracting aid has grown at a much slower pace than the sticker price, university numbers show.

Several regents, who approve tuition rates, said they're ready to discuss widening the difference between resident and nonresident rates.

"I would love for us to take that on," Regent Patricia Simmons said during a meeting this month. First, she said, the board should know if out-of-state students stay in Minnesota after they graduate. "If they come to the University of Minnesota from Iowa or Illinois or Massachusetts, do they stay here and contribute to the workforce?"

The incoming chairman of the state House higher education committee, Rep. Gene Pelowski, said he has heard complaints from a few parents about the good deal nonresidents are getting at the U.

"The intent may have been a good one," said Pelowski, DFL-Winona. "But the downside is that the resident who pays the taxes, who expects to get their best education for the best dollar, they don't see it that way."

Jenna Ross • 612-673-7168 Twitter: @ByJenna