Paradoxically, it is precisely the meager financial aid outlays of endowment-rich colleges and universities that make the true miserliness of low payout practices most apparent. Stanford University spends $76 million on undergraduate financial aid, a sum that sounds generous but amounts to a mere 0.5 percent of the value of its endowment. The university spends just 4 percent of its $14 billion endowment toward operating expenses. If the 5 percent payout rule required Stanford to spend another 1 percent of its endowment, and that money was directed toward financial aid, students would enjoy $211 million in additional support. That is precisely the cost of letting all 6,600 Stanford undergraduates attend tuition-free.
from a piece by Lynne Munson on student debt at InsideHigherEd.com
a commenter gave a link to this piece by Phillip Greenspun arguing for tuition-free-MIT