If you're talking about research grants, those are awarded based on a extensive, merit-based process, and require them to produce research. These grants have nothing to do with student recruitment. You make it sound like they're receiving government welfare, when what they did was more like winning a competitive contract.
Would you be more comfortable with the government awarding contracts to build bridges to a construction company that hires its civil engineers through family connections, or via a more objective and technical recruitment process?
If you think you can find a company that size that never hires a useless admin assistant out of nepotism, I have a bridge to sell you. Whether the engineers have the proper qualifications is something that it's reasonable to care about. Whether there's any less-than-optimal decisionmaking even in unrelated parts of the company is not.
The difference is higher education is supposed to be a ladder. That may sound like idealism but removing (or limiting) that ladder based on class is against any ideals of economic mobility or meritocracies.
That, and the notion that most people in power allocating those grants are mostly alumni who might want their descendants to have the same opportunity. The ivy league is deeply entrenched in the power structure of the US government, major corporations, etc.
Those research grants perpetuate the exclusivity of the institutions and are very much part of the appeal. It's what makes students (and their parents) pay extra and bend over backwards just to be close to that hoping that some of that genius rubs off on them. It has everything to do with student recruitment.
This is of course nothing new or world shocking. This stuff works exactly the same way in other countries. Rich people looking after each other is a thing. So is nepotism. And feudalism.
