[leplen]

Need based scholarships allow universities to have nearly perfect price discrimination. This allows them to charge different prices to different consumers and extract the maximum amount each consumer is willing/able to pay. If they had to charge everyone the same price, that price would be considerably lower than the sticker prices now.

[Paul-ish]

Are there studies on this, or is this just what we expect from economic theory?

[apexalpha]

Just think of it like this. If Harvard would charge $2000 in tuition each year but they raise the price $1000 for every $10k your parents make.

Sounds ridiculous right?

So the make the price $30.000 and give discounts if your parents don't make $100.000 instead.