Free tuition at MSU: Who benefits?

Students travel between classes outside of the Honors College on Montana State University campus in October. This year the Montana University System expects to offer tuition waivers and scholarships worth more than $48 million to more than 3,600 students statewide. The dollar total has grown nearly $8 million in the last five years. Montana State University, the state’s largest and fastest growing campus, awards the most free tuition.

Rachel Leathe, Bozeman Daily Chronicle

BOZEMAN — There may be no such thing as a free lunch, but for thousands of Montana college students, there's something even better — free tuition.

This year the Montana University System expects to offer tuition waivers and scholarships worth more than $48 million to more than 3,600 students statewide. The dollar total has grown nearly $8 million in the last five years.

Montana State University, the state's largest and fastest growing campus, awards the most free tuition. This year it plans to award $24.8 million in tuition waivers and scholarships. That's nearly double the awards in 2010.

The basic reason MSU and hundreds of other American universities award tuition waivers is that it's a great way to attract the students that colleges really want.

The No. 1 group receiving MSU's tuition waivers are high-achieving students from outside Montana — the equivalent of 545 full-time students in 2017. MSU plans to waive $12.5 million in tuition this year for out-of-state students. That's more than double the amount waived in 2010, and enough to support 590 full-time students.

No. 2 are Montana high school honors students — 440 students, who can use their scholarships at any state campus. Some 71 percent of scholarship winners picked MSU.

Graduate students are the No. 3 largest group receiving tuition waivers — 231 full-time equivalent students.

Athletes are the No. 4 biggest group MSU recruits with waivers — 222 full-time equivalent students, particularly in big sports like football and basketball.

Smaller numbers of waivers go to Montana Native Americans, university employees and their dependents, National Merit scholars, community college students, military veterans not already covered by the GI Bill and occasionally war orphans and police orphans.

Another 114 waivers are lumped together as "Montana undergraduates," which includes marching band students, presidential scholars, rodeo athletes, Indian students whose tribes used to reside in Montana, senior citizens, music students and the provost's discretionary and honors students.

What's unique about MSU's use of tuition waivers is that they have become a critical part of MSU's strategy for paying its bills.

For many years, MSU has used tuition waivers to attract out-of-state students. Out-of-state students pay $24,300 in tuition and fees this year, or three times the $7,150 that Montana students pay. Since the average cost of educating an MSU student is $13,418 this year, out-of-state tuition is thus subsidizing the college education of Montana students.

MSU can offer out-of-state students waivers and scholarships — its website advertises tuition discounts range from $1,000 up to $15,000 — and still reap enough tuition to subsidize the cost of educating Montana students.

(Tuition waivers cover only tuition, not the mandatory fees on students' bills. Subtracting fees means this year's tuition-only bills are $5,490 for in-state students and $21,194 for out-of-state students.)

University officials are quick to point out that tuition waivers aren't actual cash that MSU hands out, even if they do show up on budget sheets as "expenses."

Instead, waivers are income that the university foregoes in order to bring in more money. The exception is that MSU must actually cover the cost of education for Montana high school honors students, said Tracy Ellig, executive director of university communications. He said that's a $2.3 million cost - that's covered by revenue from out-of-state students.

Ellig compared tuition waivers to someone who makes a coffee cup at a cost of $1, sells it to Montana customers for less than $1 and marks up the price for out-of-state customers to $3. If the seller discounts the price to $2.50 to boost sales, the 50-cent discount still brings in $1.50 more than the cost of making the cup. And without the discount, the cup-maker might have no sales.

MSU's recruitment strategy has been so successful that out-of-state student numbers have grown to become more than half of its freshman classes.

Out-of-state tuition today is MSU's single biggest source of revenue — $107 million this year — compared to $52 million from in-state students' tuition and $61 million from the state treasury.

Montana's commissioner of higher education and Board of Regents have responded to MSU's success by shrinking the share of state dollars they send to the Bozeman campus, in order to send more state money to struggling campuses in Missoula, Billings and Havre.

As a result, MSU expects to get less than 27 percent of its budget this year from the state — the lowest state support in the entire University System — compared to 41 percent at the University of Montana.

This leaves MSU more dependent than ever on out-of-state students. And that means tuition waivers are more essential than ever.

That's the reason that MSU's budget is forecasting a big jump in the net subsidy it expects to clear from out-of-state students, above the cost of their education, from $5.9 million last year to $9.9 million this year. Ellig said the erosion of state dollars to educate each Montana student means relying more on out-of-state students.

"If we don't offer any tuition waivers, they will not show up," he said. "Without strategic discounting, most non-resident students would simply attend a different university .

"If non-resident students were to disappear tomorrow, it would open up a $107 million hole in our budget. With that kind of hole — this is wildly hypothetical — the university would have to close, or you'd have to raise (Montana students') tuition by 20 percent."

That means, Ellig argued, that tuition waivers end up being a "very wise" investment that benefits all MSU students — a way of "keeping education affordable for all Montanans."

FREEBIES FOR THE RICH?

Some have raised questions about the fairness of tuition waivers, as colleges and universities have shifted away from need-based aid for poorer students toward merit-based aid.

Economics reporter Catherine Rampell raised questions about tuition waivers in a 2013 New York Times Magazine article, "Freebies for the Rich."

Merit-based aid is meant to motivate high school students to achieve and keep bright students in state, Rampell acknowledged.

Yet measurements of merit, like SAT scores, she wrote, "tend to closely correlate with family income." When state colleges, hit hard by budget cuts, offer scholarships to bright, wealthier kids, it generates more revenue "than giving a free ride to one who truly needs it," she wrote, while also boosting a school's academic ranking. By devoting more scholarships to "likely college students" rather than marginal ones, she argued, states are "limiting the economic prospects of their entire populations."

MSU's Ellig rejected the notion that tuition waivers benefit better-off students who already have a lot of advantages, instead of helping students from poorer families. For one thing, he said, it ignores that big-picture reality of MSU's shrinking state funding, in a state that already ranks 46th lowest in the nation for state funding of higher education.

For another thing, Ellig said, the out-of-state students' income helps keep MSU's tuition for Montana students among the lowest in the nation among public research universities.

MSU offers a variety of scholarships and programs that benefit students from poorer backgrounds, he said.

President Waded Cruzado started two years ago the Hilleman Scholars program, saying she wanted to be true to MSU's land-grant mission of educating the children of Montana's working families.

The Hilleman program invites 50 Montana high school graduates a year, many from low-income households or families that have never had a college graduate, and offers them financial, academic and social support to help them succeed and graduate. It will cost roughly $1.5 million a year when fully up and running in its fourth year.

"What if we bet on students who do not see themselves as college material?" Cruzado said at a Hilleman Scholars event this summer.

"We are doing this on our own," Ellig said. "MSU has taken the responsibility for need-based aid and have not waited for the state to respond."

He also cited MSU programs that help military veterans and Native American students, saying many of them have high financial need.

Ilse-Mari Lee, dean of MSU's Honors College, said tuition waivers benefit "outstanding students" who have won presidential, provost and Montana honors scholarships based on merit.

"It would be a false assumption that these students are exclusively from middle-class or wealthy families," Lee wrote in an email. "Many are first-generation, low-income or under-represented students."

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