In my department, students can be paid quite differently, and accumulate multiple fellowships and assistantships. Departmental fellowships are provided upon acceptance to some top applicants. Students can also be hired as RAs by interested faculty members. RA stipends are also not fixed by the department, and vary quite widely depending on the advisor and on the funding body. On top of departmental fellowships and RA, some students also accumulate external fellowships that they earned independently.
One direct consequence of this approach is that some students are paid market-competitive salaries, whereas many other students end up not being funded at all (especially Master students).
On one hand, faculty who can afford to pay large stipends usually bring a lot of money to the department, can attract a large pool of very qualified students, and are very productive.
Most departments, on the other hand, have much more restrictive policies (some universities even set institute-wide stipend rates), and seem to be doing well.
I was recently on a committee that is trying to rethink these policies, disallowing the possibility of a combining an assistantship/external fellowships and a departmental fellowship, which will enable us to fund more students. However, one of our main concerns is that future top students may be more inclined to attend elsewhere (we lose a lot of excellent students to top schools abroad). Faculty who can pay better rates are also not satisfied with a possible change in policy. (My group is one of those that can pay competitive rates, but is willing to discuss.)
My question is: what are some issues to consider when transitioning from our more liberal student funding policy, to a more "egalitarian" policy? Anecdotal evidence is also welcome.