Public universities are funded by the state to help residents get an education. Would be kind of crappy if my state tax dollars went toward educating an out of state student. Having said that, here in the NE, there are some reciprocal arrangements between states for specific degree programs that qualify out of state students for in state tuition. Paying merit scholarships to attract the best students from out of state allows universities to do exactly what you're talking about without the possible negative press.To Schmick's point about out of state tuition. Why do public schools even do out of state tuition?
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University reputations do matter, and UT-Austin is very, very good. But, if it's a difference between paying $130k over 4 years in state and maybe 20K over the same period somewhere else, the lift in reputation would have to be pretty damn big.