Public colleges suffer as out of state enrollment declines

As state support for public higher education dries up along with tax revenues, colleges are encountering a problem on another front too: Dwindling college savings plans have left fewer families willing and able to splurge on out-of-state public colleges and universities -- depriving those colleges of what had been a lucrative source of revenue.

According to The College Board, "The average surcharge for full-time out-of-state students at public four-year institutions is $10,867." So a shift toward higher in-state enrollment leaves colleges with a sharp revenue shortfall. BusinessWeekreports that some colleges are seeing a decline of as much as 40% in out-of-state applications.

The move toward in-state schools makes perfect sense for students: If John from Vermont and Sue from New York go to their own state universities instead of each other's, they can save around $10,000 each per year. But long-term, such thrift may lead to higher prices for in-state students whose educations are no longer subsidized by out-of-staters.

It can also lead to a trickle down double whammy. As fewer students apply to out-of-state institutions, some states will find their own universities inundated with applications from residents -- and weaker students could find themselves unable to benefit from the publicly-funded colleges their parents are paying for.