If the only thing standing in the way of a student continuing on Graduate or PhD studies is grant money, they shouldn't have trouble finding a job. In that case, if the university wants to attract those students from the private sector, they'll have to find a way to increase a student's stipend to cover these expenses. At top-tier schools where tuition is the highest, their endowment is likely large enough to support this move.

Alternatively, the schools could adjust what they charge students for tuition. As the article states, the cost of a year at Princeton's grad school is $49k/yr. Somehow I suspect that this sticker price is not tied to much in terms of their cost, but if it means charging less to students if that allows them to attract top talent, they could probably do that as well.

In terms of raising the bar, to me this would mean that if graduate schools want top talent, they'll have to find a way to do it: raise the stipend, lower the cost of tuition or something else. In this case, a very bright student who can't afford graduate school will either have to go into industry or the schools will have to find a way to keep them.

On the downside, if we follow the pattern of the last 30 years, the reaction will go something like:

1) Students struggle to afford college tuition

2) Government steps in to make large cheap-ish loans available beyond what might be reasonable ().

3) Students now have access to loans to go to any school they want

4) Colleges notice that they can raise price because students don't price shop

5) Colleges raise their prices

() They're government backed loans that are difficult to discharge, mostly because there is nothing to repossess and interest rates would likely go through the roof if students could graduate and immediately discharge their loans.