Initial Thoughts

As an out-of-state student looking to study in Texas, paying expensive non-resident tuition rates can be a major financial barrier. Out-of-state tuition at Texas public universities is often more than double the in-state rate. For example, Texas public four-year schools’ average in-state tuition and fees was $8,016 in 2020-21, compared to $25,471 for non-residents.

Luckily, Texas offers several paths for non-residents to establish residency and qualify for much lower in-state tuition rates. Gaining resident status can save tens of thousands of dollars over four years. This guide covers the key requirements, options, and application process for securing in-state tuition in Texas as an out-of-state student.

Overview of Texas Residency Laws

Texas law allows three main paths to establish residency for in-state tuition purposes:

  1. 12 Months of Residency – Live in Texas for 12 continuous months and establish domicile (available to U.S. citizens/permanent residents). Requires proof like a Texas driver’s license, vehicle registration, voter registration, etc.
  2. Graduation from a Texas High School – Graduates from a Texas public or private high school after living in the state for 36 continuous months before graduation. Must also live in Texas the 12 months before enrollment. Available to some non-citizens.
  3. Transfer from a Texas College – Transfer from another Texas public college or university where you were classified as a Texas resident.

There are also special residency considerations for military servicemembers and their families.

To apply for reclassification as a Texas resident, students must provide their institution with a core residency questionnaire, supporting documentation, and a reclassification request form. Residency status impacts eligibility for in-state tuition rates and state financial aid. Reviewing Texas’ residency rules and criteria in detail is important for out-of-state students looking to establish residency.

Eligibility Criteria for in-State Tuition

Texas provides three main options for those wanting to become Texas residents, qualifying them for in-state tuition at Texas postsecondary education institutions. You only need to qualify under one of the three options; all three are unnecessary. Each has its specific requirements, which we will outline below.

High School Graduation or Equivalent

Chapter 19 of the Texas Administrative Code, Section 21.24(a)(1)(A) states that a Texas resident is “a person who has graduated from a public or accredited private high school in [Texas] or received the equivalent of a high school diploma in [Texas].” This is a straightforward qualification and quite easy to understand.

There are, however, two additional qualification requirements for high school graduates. The student must have maintained a residence continuously in Texas for 36 months before graduation and 12 months before enrollment in a college or university. (19 Tex. Admin. Code Sec. 21.24(a)(1)(B)(i and ii).

Based on the language of the law, distance learning from a Texas institution for high school will not qualify the student under this section.

Establish Domicile

This is the more commonly taken approach for students to qualify for in-state tuition, even if they may have started their educational journey outside Texas. There are specific requirements under this code section (19 Tex. Admin. Code Sec. 21.24(a)(2-3)) which will be discussed below.

To establish a domicile for tuition purposes, the student must take action at least 12 months before the semester for which in-state tuition is sought. That student’s domicile must be maintained for the 12 months preceding the deadline set by the University.

The parent of a dependent student may also establish domicile under the same 12-month requirements. The domicile of a dependent student’s parent will qualify that student for in-state tuition subject to the same time limitations.

Texas Residency

If you remember, domicile is used to establish residency, which entitles a student to pay in-state tuition. The requirement to gain in-state tuition benefits is for residency, domicile being one way to qualify for residency. The code sets forth numerous documents that can be used to establish Texas residency. While the code does not state how many are required, Section 21.24(c) clarifies that the burden is on the applicant to prove domicile by “clear and convincing evidence.”

Here are the documents that may assist in establishing residency:

  • Utility bills in the student’s name for 12 consecutive months preceding the residency application date,
  • Cancelled checks that reflect a Texas residence for the 12 consecutive months before the residency application,
  • A current credit report that supports a claim of continuous physical residence in Texas,
  • A voter registration card,
  • A lease for the rental of residential property for the prior 12 months and
  • A Texas high school transcript for the full senior year or a transcript from a Texas postsecondary school showing physical presence for the prior 12 months.

Texas Domicile

Establishing domicile in Texas can qualify for designation as a resident and, accordingly, in-state tuition. What does it mean to domicile in Texas? Four bases can be used to establish a Texas domicile.

Significant Gainful Employment

While the code does not specify “significant,” we believe 20 hours per week would qualify as significant. The employment must be in the state of Texas and last for the 12 months immediately preceding the application for residency status. With the proliferation of remote work, we believe that so long as the employee resides in Texas, such work need not be in a physical office.

Employment that requires classification as a student will not qualify. Examples are work-study jobs, stipends, fellowships, or teaching assistantships. They must be jobs removed from the educational institution.

Interestingly, the code does not prohibit the parent from employing the student. While we do not recommend this, it may present a different situation if the parent owned a business with employees and could put the student on the payroll. There would be many details to work out in this scenario.

Residential Real Property

This is the most common route chosen by students. It is easy to understand, and property ownership is common. The property MUST be titled in the student’s name alone or jointly with a spouse. If the property is held jointly by the student and parent, it will not qualify.

While property ownership seems like the easiest choice, it is not without risk. Numerous pitfalls must be avoided. First and foremost is the purchase itself. Few students have the financial resources to purchase property on their own. A parent(s) often provide some or all of the purchase price. This can trigger gift tax liability or the use of a parent’s lifetime estate tax exclusion. Failure to properly account for this gift can create penalties due to the IRS.

There is also a risk if the parent makes a loan to the student, which is entirely legal. Interest, even a smaller amount, must be charged on the loan. While payments can be interest-only, documents must evidence a real loan. When the property is sold, there could be a shortfall in the amount owed to the parent(s). This could be due to expenses associated with property ownership, including repairs, insurance, taxes, and maintenance. If the parent “forgives” this loan repayment shortfall, that triggers the issuance of 1099 to the student, as the failure to repay in full is a gain to the student.

Apartments in Austin can run to $300,000 or more. Many families simply do not have the wherewithal to purchase an additional property. This makes it seem as though only the wealthy can obtain in-state tuition. It is a case of the rich getting richer!

One should not purchase real property without consulting with a tax advisor so that no unforeseen liabilities arise.

Marriage to a Person who has established and maintained domicile in Texas.

This is a very straightforward option but unrealistic for freshmen matriculating to a post-secondary institution in Texas.

Ownership of a Business Entity

This is the method that I prefer as it is cost-effective, low-risk, and easy to understand. I recommend that the student own the company (something as simple as a single-member LLC). However, the law states that the dependent’s parent can own the company individually or jointly with the student.

There are numerous i’s to dot and t’s to cross, but creating and operating a simple business entity is inexpensive and, if done properly, successful. It is within the same code section as real property ownership and has the same legal support.

Discussion

Now that we’ve outlined the basic laws governing qualification for in-state tuition in Texas let’s put it all together. In-state tuition requires categorization as a “resident” of Texas to be afforded in-state tuition. One way to gain Texas residency is to establish a “domicile” in Texas. Don’t feel frustrated if that sounds somewhat like circular logic. To get in-state tuition, you must be a resident, and you can prove residency by establishing a domicile. If you didn’t attend high school in Texas, you must qualify by establishing a domicile.

As we mentioned, the burden of proof is on the student. That is because of Section 21.24(e), which states, in large part, that the domicile of a dependent is presumed to be that of the parent. If your parents live outside Texas, you are presumed non-resident. Furthermore, section (g) says that if you moved to Texas primarily for education, you lack the intent to become a Texas resident while in school. This all sounds quite negative, so how do people qualify?

As mentioned, the burden of proof is on the student. That simply means that the student must present accurate and comprehensive documentation to support their claim of domicile. We have outlined all of the requirements above for you. You need only follow them exactly, although there is never a guarantee of success. You should also read the code sections or retain an advisor who is well-versed in the process.

Frequently Asked Questions

How can I qualify for in-state tuition in Texas?

To qualify for in-state tuition in Texas, you must establish residency by living there for 12 consecutive months before enrolling. You must make Texas your permanent home and meet specific criteria set by each institution.

Which is the best option for me to choose?

All options have equal validity under the law if done properly. The final choice comes down to your comfort level. You should choose whichever option best fits your finances and makes the most sense. There is no right or wrong.

What is the difference between resident and non-resident status for tuition purposes?

Resident students typically pay lower, subsidized, in-state tuition rates because they are considered permanent residents of Texas. On the other hand, non-residents usually pay higher out-of-state tuition fees due to their temporary or non-permanent status within the state.

Are there exceptions or special cases that could affect my eligibility for in-state tuition?

Yes, certain exceptions exist that may impact your eligibility for in-state tuition. These include military personnel stationed in Texas, veterans using GI Bill benefits, dependents of military personnel or veterans, and individuals granted specific waivers under state law.

How does living on-campus versus off-campus affect my tuition costs as a student from out-of-state?

Living arrangements can influence your total expenses beyond just tuition fees. On-campus housing might offer convenience but could be more expensive than off-campus options like shared apartments or rental homes. Consider all costs when deciding where to live as an out-of-state student.

What factors determine if an out-of-state student qualifies for rebates on their tuition fees?

Out-of-state students may be eligible for rebates based on factors such as academic performance, financial need, and participation in certain programs or activities at the institutional level. Each college or university has its requirements and processes regarding rebate eligibility; please check with your school’s financial aid office.