The Wren Building at the College of William and Mary. Should its students pay market rates? (AP Photo/The College of William & Mary)

Taylor Reveley, president of William and Mary, seemed to be proposing that the university should charge “market rates” to Virginians. For in-state students and their parents, who are accustomed to a generous state subsidy, “market rates” is an ominous term.

It took some digging (and some help from college spokesman Brian Whitson), but I traced the debate back to a speech by Reveley at a meeting of a state higher-education agency back in summer 2010. His speech prompted a piece in a Virginia business journal more than a year later, and that, in turn, sparked a series of letters and comments in the Post and in the Flat Hat, William and Mary’s independent campus newspaper.

The president noted, in his 2010 speech to the State Council of Higher Education for Virginia, that state subsidies to William and Mary have essentially fallen off of a cliff.

“Thirty years ago,” he said, “William and Mary got 43 percent of its operating budget from the state taxpayers. We’re approaching 12 percent now and heading south.”

Not only is Virginia spending less money on public higher education in absolute terms: the state is also spending less relative to other states. Virginia now ranks 39th among states in local appropriations per student, according to the most recent national ranking.

The university has come to rely on tuition from out-of-state students, who make up only about one-third of total enrollment but pay well over half of all tuition revenue.

Non-resident students pay “market” rates to attend William and Mary: the university has raised out-of-state tuition steadily over the years, because non-residents are willing to pay a hefty premium for the privilege to attend a school with one of the nation’s highest graduation rates and its second-oldest college campus.

In-state students pay about $22,000 a year in tuition, fees and living expenses to attend William and Mary, while non-residents pay about $45,000. In a sense, non-residents subsidize the costs of attending residents. That subsidy has become “huge and indispensable,” Reveley said.

Assuming that state support will not return, William and Mary has two options, Reveley told the state panel. One is to continue raising the price for non-resident students.

But there is a problem with that plan: William and Mary already “has become more expensive” in its net price “than the private schools with which we compete for out-of-state students,” Reveley said. “(W)e are bumping up against a competitive ceiling for price increases.”

William and Mary is barred from raising its share of non-resident students, too, because of state regulations. Reveley suggests that the school could be given the flexibility to attract a “viable” percentage of out-of-state students, although he does not say what that percentage should be. Two-fifths? Half? It’s a dicey topic among Virginians, because every seat that goes to an Iowan or a Coloradan is one that will not go to a Virginian.

The other solution is to charge more money to Virginians.

“From a market standpoint, our realistic opportunity for growth is with in-state tuition,” Reveley said. “It now costs William and Mary far more to educate each student than he or she contributes in tuition and the state provides as a subsidy.”

Reveley continues, “William and Mary, with its powerful graduation rate, could charge more tuition to in-state students and still be a bargain,” compared to its peers.

I am not aware that Reveley ever actually used the words “market rates” in sequence. Nonetheless, the notion that William and Mary might charge market rates to Virginians raised eyebrows across the state. William and Mary could easily charge $40,000 to $50,000 a year and fill its freshman class.

But Reveley says his comments have been exaggerated.

What’s being contemplated, Reveley told the Flat Hat, is not “market tuition for in-state students [but] simply a step toward their contributing more of what it actually costs to educate them. At present there is a huge gap between what in-state and out-of-state students pay. We need to narrow it some.”

Whitson, the college spokesman, offered a further comment this afternoon: “Just to be clear, we are not talking about charging market rates for in-state students.”

Reveley suggests that any tuition hikes could be paired with aggressive financial aid, so that those who pay more would effectively subsidize those who pay less. This is called progressive tuition, and it has been discussed before on this page.

Peter Galuszka, a Virginia blogger, opined in the Post that Reveley’s model gives a school an incentive to enroll well-heeled students, creating “an uneven playing field” and perpetuating elitism. “Why should a kid from affluent Fairfax have a better chance of attending U-Va. or W&M than someone with the same grades and test scores from Big Stone Gap?” he wrote.

Jeffrey Trammell, rector of William and Mary, responded in the Post in defense of Reveley. The university should move to an “increasingly self-funded tuition model,” he wrote, meaning that more costs should be borne by students, whether they come from Fairfax or Fresno.