The student should not have applied ED if s/he wanted to compare prices. It is dishonorable for the student to back out of an ED admission that was affordable just because some other school comes back with a lower cost. The “insufficient financial aid” reason to back out of ED is only supposed to be used promptly, without waiting for other schools’ financial aid offers.
However, it is also dishonorable for the college to punish innocent third parties for the dishonorable student’s behavior. A dishonorable student probably cares nothing about punishments that are applied to third parties (as opposed to himself/herself), so such practices do not effectively deter dishonorable backing out of ED.
To make backing out of ED a real deterrent against dishonorable student behavior without causing collateral damage to innocent third parties, colleges should use the procedures described in reply #61. At the very least, the student should lose his/her enrollment deposit and have his/her name shared in an ED clearinghouse so that other schools that care about students honoring ED commitments can reject the student or rescind admission if already admitted.