Public sector universities offer in-state and out-of-state students similar amounts of institutional aid per ACT point. Private universities, however, offer in-state students over 65% more aid per ACT point than out-of-state students. I develop a general equilibrium model to explain why private universities price discriminate in favor of in-state students. Low in-state tuition at public universities and student preferences for staying in their home state explains my empirical results. I use the model to analyze how increasing in-state tuition changes the average ability of students at price and public universities.