Could you expand on this?

On first glance it seems like only the well-off would go to college. I won’t respond further unless I’m sure I understand your proposal

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.

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

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.

Schools would not close but adjust their spending and stop building luxury campuses

Education loans just bring more money into the system and inflate tuition, just like how 0% down mortgages inflate real estate prices