I expect it's because of who does the bargaining. In the US, where students take out loans and then pay educational institutions with that money, the student is

I expect it's because of who does the bargaining. In the US, where students take out loans and then pay educational institutions with that money, the student is the one bargaining. The student has very little leverage, comparatively, and they are not incentivized in the short term to drive a hard bargain because they're going to turn around and get the money via a loan. When the government is directly covering the cost of education, they are the ones bargaining with educational institutions. If the institution tries to bump prices, the government can pull funding for that institution and basically eliminate their revenue. As such, the institutions and government are required to negotiate much more rationally.