<p>The economics literature disagrees about the effects that non-resident (i.e., originating outside of the state) students have on potential resident students at public universities. Despite paying a premium to attend state universities, non-resident students are often accused of negatively affecting academic quality and crowding out resident students. We present new evidence on this relationship by exploiting the removal of an enrollment cap on non-resident students at a highly ranked state flagship university. We find this policy yielded a 29% increase in non-resident enrollment (coming almost entirely from domestic—rather than international—students), and a consequent 47% increase in tuition revenue which funded large increases in financial aid disbursed at the university, particularly for low-income resident students, indicating that non-resident students cross-subsidize lower-income students. We find no evidence of negative effects on several measures of academic quality or resident-student enrollment. These results imply that individual universities with excess capacity could in principle benefit their lower-income resident students by removing caps on non-resident-student enrollment.</p>