I think you would have to set the parameters very carefully. In Australia, universities have been encouraged (or forced, depending on how you look at it) by bu

I think you would have to set the parameters very carefully. In Australia, universities have been encouraged (or forced, depending on how you look at it) by budget cuts to offer courses to full fee paying students from overseas to supplement their revenue. This contrasts with the local Australian students whose courses are still highly subsidised by government funding (the subsidy has been decreasing as well though). If a university is offering a course with an aim to maximize revenue, then it will naturally want to attract as many students as possible, in competition with other local universities and with overseas universities. Often that means lowering the entrance criteria for prospective students. Because the students are paying for the course, they expect to have their degree at the end of it, and this leads to significant pressure to lower the depth and difficulty of the material taught, as well as the grading criteria, to accommodate the weakest students. I don't believe the actual teaching is poor, but the quality of education is lowered. I know professors who have had to take phone calls from overseas from parents demanding to have their children's grades altered, with a financial threat attached. Reputation is a key driver in students' choice of university, which adds a further incentive to placate the customer. I don't know if any of these anecdotes actually resulted in a "pay-for-grade" situation, but the normally assumed academic independence is certainly threatened. Maybe education can be made to work well under a competitive market system, but in this situation I don't think it has, and I'm not smart enough to think of ways to fix this particular situation.