On the undergrad side, the universities are making so much money from foreign students because they're charging them rack rate, whereas most U.S. students get s

On the undergrad side, the universities are making so much money from foreign students because they're charging them rack rate, whereas most U.S. students get some form of financial aid from the university. If you replaced a U.S. student with a foreign student, the university is going to have to tighten its belt. For grad students, the tuition waiver costs the same amount regardless of where the student is from. Assuming you could fill the ranks with (presumably less qualified overall) U.S. students, and the same amount of grant money was available, it doesn't make any difference.