"So, when I come out with my new and improved product, I should, instead of selling it, let everyone have my previous product for free???"

Why "instead"? Especially in case the target markets don't overlap, and in case there is still (even small) demand for the old product. You don't want to give it away? Then sell it. If the old product, sold, cuts into market share of your "new and improved" product, you should definitely rethink the "news and improvements". Trying to force the new product upon your customers (while they would prefer the old one, but you just made it unavailable) is definitely evil.

But there's even more. I have an old Logitech scanner. Enough for me. But I don't have the drivers. And what I find out? "This product is obsolete, we don't provide any kind of support or drivers for it". I'm left with a piece of useless crap. Now I know I need to buy a new scanner. But one thing I know for sure is, it won't be from Logitech. Nor any device that would require drivers. Simply because I don't want to find myself in the same situation in 3 years.

Announcing "end of life" of a product is a very dangerous step that may cost you a lot.

"If you can guarantee me that a student I give something to will NEVER use it for commercial purposes and NEVER give it to someone else, I am sure you can also guarantee me that the moon is made of green cheese."
I can't, mainly because if you give something to a student, you can't be sure he won't make a moon of green cheese with it. Creative bunch, they are. But I can guarantee you that with proper strategy you can make more profit by giving things away to students than by not giving them. At least in a way that if you provide them with a limited, educational version now, they are more likely to purchase a full version later, when they really need it and see direct profit from purchasing and using it. If you don't, they will get a cracked full version now, and won't even think about paying you until they feel the breath of the Police on their necks.