On the face of it, that makes absolutely no sense. Did the court think lower tuition was not an "educational benefit," or did it interpret the Federal statute as applying only to Federal benefits such as grants or loans?
Arrest and deportation makes this a non-issue.
I read it to mean that the “in-state-tuition” benefit was granted based on attending California High School, NOT residency, so it passed federal muster.
I guess if you live outside of California, but sneak across the border and attend 3 years of high school, you could also get in-state tuition.
I would recommend instead that we all avoid sending our kids to college in California, since they might learn all sorts of bad habits out there.