[praxulus]

If anything free education allows you to raise your standards. The group of applicants who are academically qualified should be strictly larger than the group that's both academically qualified and willing to pay tuition. With a larger pool of qualified applicants you can afford to reject more of them.

(Caveat: This doesn't work if the point of your university is mostly to signal that its graduates came from a family wealthy enough to send them to your university.)