Tipping the Cap

New Colorado law – nominally about merit scholarships – is a backdoor way to let public universities enroll more out-of-state students without raising the state’s statutory cap on out-of-state students.

June 6, 2013

The new reward for high-achieving Colorado high school students is that they get to go to college twice.

At least on paper, that is.

Colorado Governor John Hickenlooper signed into law Wednesday a bill that creates a new class of merit scholarship for Colorado residents who achieve certain criteria, such as a high grade point average or high school class rank. The bill allows universities that enroll these “Colorado Scholars” to count them as two in-state students when calculating the ratio of in-state to out-of-state students, effectively giving institutions a way to enroll a larger proportion of out-of-state students without violating the statutorily mandated cap on non-resident students, which is already among the highest in the country.

The law is an attempt by Colorado universities to generate more in tuition revenue at a time when state support for higher education has dropped precipitously and doesn’t show any signs of returning to pre-recession levels. And it is an attempt to do so without directly opening up the politically divisive issue of out-of-state enrollment, a move that has generated significant backlash in states that have tried to discuss the topic.

"[Colorado School of] Mines supported this bill because we believe merit scholarships are an important tool to help ensure the state of Colorado keeps its best and brightest students,” Peter Han, chief of staff at the School of Mines, said in an e-mail statement. “Given limited state resources, recruiting additional non-resident students provides some of the financial flexibility to make such merit scholarships possible."

The bill sailed through the legislature with little formal opposition, passing 59-4 in the state House of Representatives and 27-8 in the state Senate. No groups or institutions testified against the bill in the legislature, and there was relatively little mention of the bill in the Colorado news media. The Colorado Department of Higher Education was officially neutral on the bill but expressed reservations about the fact that the discussion about the cap was being shrouded by the merit aid issue, saying that if institutions want to raise the cap, they should just get lawmakers to address it directly.

“They did not want to have that conversation,” said Chad Marturano, legislative liaison for the Department of Higher Education.

Marturano also raised concerns about the effect of the change on disadvantaged groups. Recent research has suggested that increasing out-of-state enrollment reduces minority and low-income student enrollment.

While administrators at the state’s universities have argued that the new program is designed to retain top talent in Colorado, the only aspect of the plan that needed legislative approval was the request to change how the enrollment formula is calculated.

Colorado universities do not need legislative approval to create merit scholarship programs. Most of the state’s public universities have their own institutionally funded merit scholarship programs, such as the Esteemed Scholars Program at the University of Colorado at Boulder. The final version of the bill also did not ask for state money to fund the new program. The scholarships will be funded through the extra tuition revenue associated with the increase in out-of-state student enrollment.

Colorado has a relatively high cap on the percentage of out-of-state students its universities can enroll compared to other states, so the new law is unlikely to affect most public institutions. Non-resident students can make up as much as 45 percent of an incoming freshman class and no more than 33 percent of the overall student body.

Because the cap is so high, the University of Colorado at Boulder is the only institution that is close to violating it. It and the School of Mines, which has stated that it aspires to increase its out-of-state enrollment, were the only two institutions to testify for the bill, though Colorado State University officials also expressed support.

This is not the first time Colorado universities have sought to get around the cap. In 2010, state lawmakers allowed the university to exempt international students from the calculation of in-state and out-of-state students. Colorado-Boulder promptly saw an increase in international students -- who often pay more than residents and don’t receive aid.

Colorado universities are far from alone in trying to build out-of-state enrollment and enrollment of students who can afford higher tuition prices. In Inside Higher Ed's 2012 survey of college and university admissions officers, 45 percent of respondents from four-year public institutions said they were very likely to increase recruitment efforts of out-of-state students, and 30 percent said they were very likely to increase recruitment efforts of full-paying students.

Colorado’s universities have seen a precipitous decline in state funding over the past few years, coupled with a significant increase in enrollment. Between 2002 and 2010, per-student funding at the University of Colorado and Colorado State University dropped 48 percent, the largest decrease of any state over that time period, according to a report by the National Science Foundation.

The law could present a revenue boost for institutions that take advantage of it. The law requires the university to award Colorado Scholars at least $2,500 annually. Out-of-state students pay about $30,000 a year in tuition to attend Boulder. According to the Delta Cost project, the Boulder campus spent about $13,500 per student on education and related expenses annually. So even after subtracting the merit aid award, the university will make a sizable amount of revenue off each out-of-state student.


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