>The union pay scale that pays lousy old teachers much more than young good ones is politically untouchable.
I think that is greatly simplifying a complicated problem. There are many reasons a teacher cannot get paid more in a low income school. They may be limited by the local government entity (state or municipality) or the environment may be very difficult. It can become equally politically problematic to adjust the payscale for low income schools as it can to incentivize working there.
>For one thing, it doesn't incentivize universities to offer more affordable educations, since people like your friend become price-insensitive.
Everyone who gets a college education is price insensitive and it has everything to do with loans, but likely little to do with the public service incentive. As long as loans are available and assistance is not, universities (most of which are public) will not have incentive to offer affordable educations. It's a serious problem, but one that has more to do with a culture of "Get an education and get a great job, even if you major in philosophy" than with "Be a teacher and we'll give you a break for serving the public good."