The Constitution states that the federal government has the right to regulate commerce between the states. As shown in Gibbons v. Ogden; Heart of Atlanta Motel, Inc. v. U.S.; Katzenback v. McClung; West Lynn Creamery v. Healy, etc., essentially anything relating to other states is subject to the Commerce clause. As the American Bar site says:
The Court ruled in Heart of Atlanta Motel, Inc. v. U.S. (1964) that Congress had plenty of authority under the Commerce Clause to ban racial discrimination at the hotel because the hotel catered to interstate travelers and it therefore affected interstate commerce. The Court ruled the same day in Katzenbach v. McClung (1964) that Congress had plenty of authority under the Commerce Clause to ban racial discrimination at Ollie’s Barbecue because a good portion of the food used by the restaurant was imported from out of state, and the restaurant therefore affected interstate commerce.
This shows how almost anything serving someone from out-of-state relates to the Commerce clause. So colleges are subject to the Commerce clause. Why are colleges allowed to charge out-of-state students tens of thousands more for college, constitutionally?
There's probably a good argument that Congress could forbid this practice under the Commerce Clause, if they wished. However, they apparently have not seen fit to do so, presumably because it would be politically unpopular to effectively require state taxpayers to subsidize residents of other states. The Constitution allows Congress to make laws on various topics, but doesn't require it.
Commented Mar 19, 2017 at 18:03I'm not aware of any federal code that forbids "discrimination" based on state of residence. And I am aware of many U.S. state programs that only provide benefits to residents based on what the state determines to be their place of residence.
Commented Mar 19, 2017 at 18:31@NateEldredge While I agree that Congress could forbid this practice under the Commerce Clause or by other means (e.g. the enforcement clause of the 14th Amendment), there are doctrines that would naively prohibit this practice in the absence of Congressional enactments which the courts have chosen not to apply to this case as explained in my answer.
Commented Mar 20, 2017 at 9:46@feetwet There are practices of discrimination based upon state of residence that are forbidden (e.g. admission to the legal profession in a state). And, there are also limitations on what means a state can use to determine state residence. Vlandis v. Kline, 412 U.S. 441 (1973).
Commented Mar 20, 2017 at 9:47@Nij: my question is unrelated to the full faith and credit clause, rather is related to the 14th amendment (privileges and immunities) and the dormant commerce clause, as described in the answers below.
Commented Jan 25, 2019 at 22:52There are two constitutional doctrines that prohibit discrimination based upon state of residence.
One is the dormant commerce clause (a court created doctrine) and the other is the privileges and immunities clause. There are actually two privileges and immunities clauses, one in Article IV, Section 2, Clause 1, which states:
The Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States.
and the other in Section 1 of the 14th Amendment which states:
All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the state wherein they reside. No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.
Some of the leading privilege and immunities cases are reviewed here.
With respect to the dormant commerce clause, per the link above:
[I]n a dormant Commerce Clause case, a court is initially concerned with whether the law facially discriminates against out-of-state actors or has the effect of favoring in-state economic interests over out-of-state interests. Discriminatory laws motivated by "simple economic protectionism" are subject to a "virtually per se rule of invalidity," City of Philadelphia v. New Jersey, 437 U.S. 617 (1978), Dean Milk Co. v. City of Madison, Wisconsin, 340 U.S. 349 (1951), Hunt v. Washington State Apple Advertising Comm., 432 U.S. 333 (1977) which can only be overcome by a showing that the State has no other means to advance a legitimate local purpose, Maine v. Taylor, 477 U.S. 131(1986). See also Brown-Forman Distillers v. New York State Liquor Authority, 476 U.S. 573 (1986).
Notwithstanding these constitutional protections against discrimination based upon state residence, the U.S. Supreme Court held that this discrimination is constitutional in the case Vlandis v. Kline, 412 U.S. 441 (1973) and reaffirmed the continuing vitality of that decision in Saenz v. Roe, 526 U.S. 489 (1999). The majority opinion in Vlandis v. Kline explains this authority was basically undisputed at that time:
The appellees do not challenge, nor did the District Court invalidate, the option of the State to classify students as resident and nonresident students, thereby obligating nonresident students to pay higher tuition and fees than do bona fide residents. The State's right to make such a classification is unquestioned here.
Some of the justification is set forth in the Saenz v. Roe (1999) decision which states:
The second component of the right to travel is, however, expressly protected by the text of the Constitution. The first sentence of Article IV, § 2, provides: "The Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States." Thus, by virtue of a person's state citizenship, a citizen of one State who travels in other States, intending to return home at the end of his journey, is entitled to enjoy the "Privileges and Immunities of Citizens in the several States" that he visits. This provision removes "from the citizens of each State the disabilities of alienage in the other States." It provides important protections for nonresidents who enter a State whether to obtain employment, to procure medical services, or even to engage in commercial shrimp fishing, Toomer v. Witsell, 334 U.S. 385 (1948). Those protections are not "absolute," but the Clause "does bar discrimination against citizens of other States where there is no substantial reason for the discrimination beyond the mere fact that they are citizens of other States." There may be a substantial reason for requiring the nonresident to pay more than the resident for a hunting license, see Baldwin v. Fish and Game Comm'n of Mont., 436 U.S. 371 (1978), or to enroll in the state university, see Vlandis v. Kline, 412 U.S. 441 (1973), but our cases have not identified any acceptable reason for qualifying the protection afforded by the Clause for "the 'citizen of State A who ventures into State B' to settle there and establish a home." Zobel, 457 U.S. at 74 (O'CONNOR, J., concurring in judgment). Permissible justifications for discrimination between residents and nonresidents are simply inapplicable to a nonresident's exercise of the right to move into another State and become a resident of that State.
Despite fundamentally differing views concerning the coverage of the Privileges or Immunities Clause of the Fourteenth Amendment, most notably expressed in the majority and dissenting opinions in the Slaughter-House Cases (1873), it has always been common ground that this Clause protects the third component of the right to travel. Writing for the majority in the Slaughter-House Cases, Justice Miller explained that one of the privileges conferred by this Clause "is that a citizen of the United States can, of his own volition, become a citizen of any State of the Union by a bona fide residence therein, with the same rights as other citizens of that State."
Basically, the exception isn't logical and instead is a case of the Courts upholding a common practice that seems to make economic sense, notwithstanding that fact that it is clearly contrary to the relevant constitutional provisions and doctrines. The life of the law is not reason, it is experience. Assuming logical consistency in the law will often lead you to a descriptively inaccurate result.