Where you stand depends upon where you sit, as the saying goes. For eligible law students, tuition discounting provides an unalloyed good. Q.E.D. This a wealth transfer from law school general revenue, more often than not from tuition generated by other students who are providing this cross-subsidy. What's not to like?
How about this: The overall scheme redounds to the detriment of needy students in the aggregate. Students who collect the subsidy are not necessarily — and I would suggest not especially — in the pool for which financial support to address the gap between what they can afford and what the school charges. And, to make matters worse, law schools have a clear incentive to increase tuition precisely in order to pay for this cross-subsidy, the result of which is needy students are farther and farther from the shore. So, it would be a mistake to think of tuition discounting are "pro student" in some global sense. Rather, it is a way in which law schools (a) down the pecking order (and, except for Yale, we are all down the pecking order), and (b) who can afford to do so, maintain their competitive credentials and enrollment levels. That this benefits a few meritorious (lucky?) students at the top of the applicant food chain is a by-product of this strategy.
The systemic effects of the strategies are problematic in the long run. A large group of students are on the other side of the glass looking in, as they are paying a high sticker price to support the overall economic structure of the law school. A small group of students get a windfall. And for these group of students, they are making a choice that is not necessarily optimal in that they are eschewing prestige and the professional advantages that accompany it in order to reduce their financial burdens. To be clear, no one should judge the individual student who insists with evidence that they cannot afford higher tuition at [first choice school]. But we are back to the basic point: If it is need, not want, that is driving this enrollment decision by the high merit student at the margin, then a more ideal system would look more fundamentally at need-based financial aid in order to reduce debt.
A short digression here about debt load: Tuition discounting may indeed bring down aggregate debt load, but the devil here is in the details. Is the effect of this financial sorting to increase significantly the number of students who will leave with zero or modest debt (beneficiaries of the sort) while increasing by some measurable amount the students who will see their debt loads increase? The ABA furnishes us data about aggregate debt, and also about % of students who receive scholarships. We can certainly extrapolate tuition discount rates from extant data. But we don't typically know exactly how the benefits and burdens are distributed. Nor can we know what needs knowing, which are the employment & entry-level compensation profile of students who receive these discounts and at which level. Nuanced information about both the magnitude and the impact of this cross-subsidy requires such fine-grained information.
In a last post on this topic, I will offer some thoughts about discounting and professional school economics more generally. For now, I hope to have sparked at least a bit more thinking about the connection between aggressive discounting and student well-being. No clear conclusions or profound wisdom here, but just a modest suggestion that the matter is complex and controversial.