Texas' public colleges and universities charge significantly lower tuition rates for Texas residents than they do for nonresidents. In general, your permanent residence -- not just your school address -- must be in Texas for you to qualify for the lower "in-state" rates. However, state law provides for a number of exceptions.
The tuition charged by Texas' public colleges is actually a combination of two charges: "statutory tuition" and "designated tuition." Statutory tuition is set by state law and is the same at all schools -- but there are different statutory rates for Texas residents and nonresidents. Designated tuition is an extra charge on top of statutory tuition; it varies according to the needs of each school. Residents and nonresidents alike pay the same amount in designated tuition.
As of 2011, state law sets the statutory undergraduate tuition for Texas residents -- at most public colleges -- at $50 per credit hour per semester. For nonresidents it's more complicated. The law requires state education officials to review tuition policies in other states to determine how much a Texas resident will be charged as a non-resident student at state universities in the five most populous states besides Texas. Those states, as of 2011, are California, New York, Florida, Illinois and Pennsylvania. Texas then sets its non-resident tuition rate as the average of those five states. As of 2011, the non-resident rate in Texas was $360 per credit hour, per semester.
For tuition purposes, you're a Texas resident if your permanent address has been in Texas for at least 12 months when the semester begins. If you're under 18, your parents' permanent address must have been in Texas for at least 12 months. Even if your permanent residence is somewhere else, you can still claim Texas residency if you graduated from a Texas high school, lived in Texas for the 36 months immediately before graduating, and have lived in Texas for at least 12 months before the semester starts. To qualify as a resident, you must also be either a U.S. citizen or a person who is in the country legally.
Residents of states that border Texas -- New Mexico, Oklahoma, Arkansas and Louisiana -- can pay resident rates if they enroll at a college in a Texas county immediately adjacent to their state. Also, out-of-state residents who live in a county adjacent to Texas can pay resident rates at all Texas schools -- provided their own states will allow a Texas student in a similar situation pay resident rates. As of 2011, that applies only to New Mexico and Louisiana.
Several other groups of people are also allowed to pay resident rates even though they might not qualify as residents because they don't live in Texas or haven't lived in the state long enough. These groups include children or spouses of members of the military stationed in Texas; children or spouses of commissioned officers of the U.S. Public Health Service stationed in Texas; children or spouses of teachers, professors or research assistants at Texas public colleges and residents of Mexico who can demonstrate financial need.