Prospective students, their families, and the schools all responded rationally and predictably. Funding either needs to remain consistent with inflation or slowly phased out.

Good schools do worry about repayment of applicants, but not all schools are good or in a financial position to worry about that.

What most schools are trying to do right now is rapidly expand their endowments with the hope to be able to consistently and sustainably offer tuition discounts and aid to students. The schools with the largest endowments are already essentially free if your family makes below a certain threshold, however this is only a handful of elite schools. For most schools they have what is called a “discount rate.” That is, the rate of students that receive a discount on the sticker price of tuition. These days most families receive a discount to most schools, which is a pretty dramatic from even 10 years ago when most students paid the full tuition price.