Even university administrators must anticipate adverse selection. My fine university is working to become even finer. The university has been able to hire more and better researchers and is experiencing very impressive enrollment growth. One metric the university wants to improve is our graduation rate. Historically we have had an embarrassingly low 52% graduation rate. Many students can get admitted to the university but do not meet higher requirements for admission to a departmental major and then drop out. To boost student retention, the university has developed a degree in generic "University Studies," a catch-all for these students, administered by University College.
How would one expect departments to react? 'Low quality' students are headaches that suck up departmental resources. We set departmental admissions criteria to avoid dealing with these students. I just came from an academic standards meeting in which two of our academic units have proposed to increase departmental admission standards (GPA in the program) even further. A justification for not doing this earlier was that it was not fair to students who have made it to their senior year by taking courses in a program and then have this coursework not count toward a degree on campus. But with "University Studies" these courses can apply to a degree. The various departments are in a race to dump their 'low quality' students into "University College."