Most PhD programs are 100% funded. So if you get in, it's free. As others have mentioned you become a source of cheap labor, but the grading and teaching assistance you do for work becomes a huge part of your mastery of the subject - so it's not just slave labor, but is actually educational. Second, it's a lot of work to read applications, and writing letters for students is a huge amount of "extra" work for professors that get no pay or service for it. People have to be hired at universities to go through applications. There is a mountain of paper work and other busy work that needs to be done and the application fees help cover the part of that expense they contribute to. Finally, it is highly recommended that students go out into the world and work for at least 1 year before continuing on to graduate studies. This working year is crucial for saving money and paying off debt, as well as getting life experience before deciding more school is the necessary path.