I know many undergraduate students who are often confused whether to make an MS or PhD application when applying to US universities. They often have the credentials required in a PhD application - good grades, UG-level research, good SOP, etc.
In general, whenever there is a conflict of MS versus PhD, reasonably good students deem it safer to apply for a PhD. While there are lesser positions for PhD, an admit ensures funding and tuition waiver. Later many of those students quit PhD midway and graduate with a master's degree.
What are the risks involved when bachelor's students apply to PhD for purely monetary reasons? Will the tuition waiver cancelled and the students be required to pay the entire fees when they quit? Or do universities bear this loss due to admission decisions that did not work out? Are there any other penalties involved?