Federal funding for universities is not "free cash for universities to subsidize students." When people talk about federal funding we are talking about researc

Federal funding for universities is not "free cash for universities to subsidize students." When people talk about federal funding we are talking about research funding. The NSF decides that they want to fund research on topic X for reason Y. They put a call for grant applications. Labs submit grant applications and the NSF chooses the ones they think are most valuable. Those labs get money to pay for faculty and grad student salaries and lab equipment. The labs perform the research and publish it for the broader societal good.