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I went to the University in my home town,* and I can tell you that it is definitely still possible to fly the nest locally as long as that's what the kid wants. If you think she's going to try to rely on you, then yeah, she needs to get at least a couple hours out of town, but I was busy proving I was an adult and the last thing in the world I would have done was come home to do my laundry.
Being courted for any extracurricular is a big deal, even if you've never heard of those particular schools' swimming programs. Look very seriously at the quality of the schools that are trying to attract her, and see if they're good enough. From a genuine education standpoint, there's not much difference between all the upper-mid-range schools, which includes most state universities. Like I said, some schools are well-known for very specific programs, but if she's not sure what she wants to do, the main consideration should be a school that's A.) got good enough name recognition and B.) costs as little as possible.
*My safety school, to be honest, because while I got in almost everywhere, we were really thinking I was going to get more financial aid than I did. Northwestern threw me $500/year to offset a $30,000/year tuition. My parents laughed and I secretly cried. Anyway...
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