Paul Krugman really does not seem to understand the effect of third-party payments, and he especially does not understand when it comes to the government and the cost of higher education. In a recent post, he implies that anyone who does not favor massive increases in Pell Grants does so because he does not want the "less fortunate" to have educational opportunities.
Of course, I have a solution: places like Princeton, Harvard, Yale and Stanford have huge endowments. Why not just offer free tuition at these places to students who are "less fortunate" and have admissions policies that will guarantee that people from poor schools can be accepted, no matter what their academic performance might be.
You see, Krugman both claims to be against a stratified caste system, and yet he demands that the USA become like Europe which is heavily stratified and where one's location in the higher-education hierarchy determines ones future. For that matter, the old Soviet Union had the same kind of system.
However, once upon a time, the USA was not stratified in this manner, back before the Progressives gained power and decided that "credentials" were more important than real qualifications. If Krugman really wished to get rid of this "caste" system he claims exists, then he would be in favor of giving entrepreneurs the freedom to produce and end the various regulatory policies of licensing and the like that serve to hold back deserving people.