The South’s Zero-Sum Market for Out-of-State Students

Pre-COVID Higher Ed: Tough out-of-state recruitment markets pressured Ole Miss

Previous installments on southern public universities covered how a price hike for out-of-state students by powerhouse University of Alabama led to enrollment declinesleading to looser admissions standards, and then how the less prominent Mississippi State had managed to effectively navigate the sometimes treacherous out-of-state marketplace.

The Zero-Sum Game

Though public university enrollment officers understandably view the hundreds of thousands of high school students in neighboring states as a target rich environment, prospects in fact form a limited pool, not an unconstrained growth opportunity. The total pool of out-of-staters who go on to attend this region’s public institutions is largely static:

Includes Auburn, Univ. of Alabama, Univ. of Arkansas, Central Arkansas, LSU, Louisiana-Lafayette, Miss State, Univ of Mississippi, Univ of Tennessee, Middle Tennesse State, Memphis, East Tennessee,, Tennessee-Chatanooga, Tennessee Tech

* Includes out-of-state enrollment at large public universities in Alabama, Louisiana, Arkansas, Tennessee and Mississippi.

** The increase from 2015 to 2016 was due to principally to larger University of Alabama entering out-of-state class.

*** For clarity, a Tennessee resident who enrolls in, say, Auburn counts as out-of-state.

The University of Mississippi

If Alabama is most prominently associated with recruiting out-of-state, the University of Mississippi (Ole Miss) emphasizes it nearly as much:

Many of Mississippi’s out-of-staters come from neighboring states but the school also has very effective recruiting efforts in the Midwest (Illinois, Missouri are strengths) and Texas. This success with out-of-state bears risks, as we have seen in earlier posts.

Ole Miss caught flat-footed 

The 2017 admissions cycle was a disappointing one for Ole Miss, with a pretty steep drop in out-of-state enrollment:

Out-of-state entering class enrollment

The drop occurred despite Mississippi maintaining price discipline:

CTAS internal estimates of Univ of Mississippi’s out-of-state Average Net Cost

CTAS internal estimates of Univ of Mississippi’s out-of-state Average Net Cost

The decline seems to have surprised university management, judging from this article where they work to spin the enrollment outcome:

“We have focused on recruiting more Mississippi students, through our general admissions programs” – Brandi Hephner LaBanc, vice chancellor for student affairs.

In fact, the number of in-state students was mostly unchanged between 2016 and 2017. And University of Mississippi metrics, including the proportion of out-of-state students arriving in the two following cycles, 2018 and 2019, show no signs of the change in strategy alluded to by LaBanc.

The article also highlights the university’s very active capital expansion process, with major residential and athletic facilities recently completed and more in construction.  This indicates that management was focused on building capacity to host its students, not planning on the enrollment drops that Ole Miss was about to experience.

So 2017 simply showed a bad cycle — and a surprise — for Mississippi.

The University of Mississippi campus

The University of Mississippi campus

As we did with the University of Alabama, let’s trace out the sequence through the admissions cycles after Mississippi’s 2017 shortfall.  2018 and 2019 saw further drops in out-of-state entering classes.

Ole Miss Out-of-state entering class enrollment

Out-of-state entering class enrollment

After 2017’s enrollment declines, Mississippi chose not to increase the financial aid budget in the next cycle in 2018, perhaps for internal budget reasons.

As a result, out-of-state pricing increased:

 

CTAS internal estimates of Mississippi’s out-of-state Average Net Cost

CTAS internal estimates of Mississippi’s out-of-state Average Net Cost

While the school’s overall enrollment had begun to decline prior to the decision on financial aid, the higher prices seem to have further dissuaded students from coming:

Entering full-time class: 900 fewer entering students over 5 years, about evenly divided between in- and out-of-state. Both in- and out-of-state tallies shown to illustrate how falling enrollment in one category was not offset by rising enrollment in the other.

Enrollment declines were accompanied by a relaxation of admissions standards, loose to begin with, leaving Ole Miss close to open enrollment. (This is an emerging trend with state flagships. Flagships in states like Oregon, New Mexico or Maine can’t turn anyone away if they hope to hit their enrollment targets.)

Already weak admissions standards loosened (Admissions %)

With loosening admissions standards came lower yields. Mississippi’s descended to levels similar to the University of Alabama’s, both below their peer group average.

Yield %

In the previous piece on the southern “Importers” we had posited that colleges reliant on the out-of-state market had to either sacrifice admissions standards or keep pricing flat to avoid falling out-of-state enrollment. The University of Mississippi chose a sort of middle path, somewhat loosening admissions and somewhat raising prices, and it didn’t work.

The University of Mississippi - The Grove

The University of Mississippi – The Grove

Takeaways

  • The pool of out-of-state recruits for public institutions in the south is largely static.
  • The University of Mississippi looks to have been caught by surprise by the drop in out-of-state enrollment in 2017. This drop was not accompanied by any price increases or significant change in selectivity.
  • Because Mississippi is close to open enrollment, its only remaining lever to stem future enrollment declines is discounting. State of Mississippi appropriations for higher education staff have increased minimally so tuition revenue will continue to gain in fiscal importance for the university. University capital budgets for 2019 and onwards were in fact slashed, suggesting that Ole Miss management is firmly focussed on the cost control needed to support flat pricing.

In the Zero Sum world outlined here, if one school picks up out-of-state enrollment; another one must lose it. Our next piece in this series on the pre-COVID higher ed landscape will look at LSU’s increased interest in out-of-state recruitment and what it meant for the other Importers.