As highlighted by Kevin Carey, in Arizona people can make tax deductible contributions to scholarship giving groups, with an explicit understanding of what school will get the money, and sometimes (often?) an implicit understanding of which students it will benefit.
This mirrors colleges in two ways. First, the process is completely corrupting. Reading the investigative journalism at the East Valley Tribune reminds me a lot of Price of Admission, which details how the rich buy their way into elite colleges.
Second, as Tribune describes
Even as they took in millions of dollars in scholarships, the state’s private schools hiked tuition dramatically, pushing the cost of private education further from the grasp of middle- and low-income families.Carey comments:
Flush with an influx of free government money… private schools did the economically rational thing and started jacking up tuition at alarming rates, further pricing out low- and middle-income students.This is exactly what I’ve been saying colleges do, so I guess my theory is even more applicable than I thought, explaining the behavior of private high schools as well as colleges.