Financial aid is, at its core, a price-discrimination scheme. Consumers pay different prices (net of financial aid) for the same service. Higher education is the very rare market where the seller says “Tell me in detail about your ability to pay, and I’ll tell you what your (net) price will be.” But instead of maximizing firm revenue, the goal is to enhance equity. By increasing the effective tuition for some of our wealthier students, we might be able to reduce the price for some of the less wealthy.
As a self-interested professor, all I can say is: whoo hoo!
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