Fraud, Waste, Abuse? Unit to spend more money on TDY to not pay soldier Per Diem.

Hard to say. Money for these things come from different pots and therefore the unit may be saving unit funds because the flight is being paid from somewhere else. These funding things can be a nightmare depending on who is doing the oversight.

Sounds like regulations with unintended consequences coupled with a fear of challenging standing orders with the responsible command. Surely, whoever wrote that regulation would grant exceptions if the facts were brought to his/her attention.

Can he not submit an constructive travel worksheet to show which option is advantageous to the government and traveler? (is he doing this in DTS or are orders being made for him?)

That's what I do on most of my TDY's because I prefer to drive if it can be done in a day. Most of the time it is cheaper to just compare driving mileage costs vs. the airfare to show that it's better for the government.
You have to take ALL costs into account however to show which one is better.
Option 1 - within 3 hours of driving
- Include the daily per diem costs
- Include the daily lodging costs
- Include the Mileage costs for driving his POV (I'm assuming that would be the travel method within 300 miles)
Option 2 - fly to another location
- Include cost of flights (including taxes, baggage & booking fees)
- Include the daily lodging costs
- Include rental car and rental car expenses (gas, taxes) if he would be authorized a rental car
- if not authorized a rental car, include expenses incurred to travel from airport to the place of duty (taxi, shuttle, public transit, etc.)

If you want option 1, you must show ALL costs that are not identical for each trip. Then, you must show costs for option 2 that at least show that it is more expensive. It's better to show everything, but like I said above many of mine will just show the cost of the airfare if that is higher than all other costs on option 1.

Army logic at it's finest.

Nah, just bureaucratic inefficiency. Tell him to enjoy the flights.

This is what we refer to a "colors of money" issue.

It's counter-intuitive because we think it all spends the same. It doesn't, because there are rules regarding how it is allocated and spent.

Using your example, they may have a surplus of Travel money, but no per diem money. Likewise many units won't send people places because they don't have adequate travel budgets. We're just seeing the reverse of this.

It may sound like fraud, waste and abuse depending on where the funds are coming from and how they determined which is advantageous to the unit.

Sounds like military logic is alive and well...

I would recommend following MAJ Matt Hylton's guidance and do do the cost analysis to submit to the unit command to make the call.

Everyone has already covered the funding sources, and variety of policies and regulations so I will leave that alone. I thought it was a live in course and all students are placed on a meal card? That would mean eating in the DFAC for the majority if not all of your meals.