Their admissions are need-blind, so they can't "just take fewer students" from a given income bracket.

I mean it somewhat facetiously. I went to Cornell, and judging by the prices for books, food (the items that are really marked up), margins are important to them. Then again, they have less money than Stanford.

they have 17 billion dollars in cash from donations and various other means. they're now disbursing that through the free tuition process.

These Universities have huge endowments.

Harvard's stands around $35 billion (http://www.news.harvard.edu/gazette/2007/08.23/99-endowment....). At a conservative 4% draw rate, this could fund 40,000 students per year at $35k/yr tuition, forever. So really, free tuition is chump change for them. Obviously they have a lot of other stuff to support with their endowment, but they only have about 6700 undergrads (http://www.admissionsconsultants.com/college/harvard.asp), so it's not really an issue.

They probably just decided to scale back the budget by 5% on one "monument to some architect's ego".