<p>^^^ My reading is that it does not need to increase financial aid budged. Only “monopoly money” financial aid money.</p>
<p>Suppose a school has two students. The first is on finaid and can pay up to 10K; the other studend can afford 100K. Also suppose the cost of educating astudent is 30K.</p>
<p>a) If the tuition is set to $60K the school net revenue is 60K + 10K - 2*(30K) = 10K.</p>
<p>b) If the tuition is set to $100K the school net revenue is 100K + 10K - 2*(30K) = 50K.</p>
<p>In the example b the “financial aid budget” increases from 50K to 90K, but the school makes much more net revenue. The thing is that in many situations these “financial aid budgets” are just “monopoly money”. They only exhist as an internal accounting number. Granted, there are cases in which the overall cost of educating the students is higher than the overall tuition income, but this only happens when schools have monstruous endowments or when schools are subsidised by tax revenues.</p>