How is the SAT relevant? They should be looking at the GRE exclusively. This is one of the biggest problems with the US education system (and education in general.) The assumption is made that certain people cannot learn based on the fact that they know nothing.

Having been to a private liberal arts college, the environment is extremely rigorous. You can get the same sort of thing at state schools, but you have to be in the honors programs. I'd be interested to see if there are honors-track programs at the larger public schools that show the same "grade inflation." But because the public school is self-contained, the effect, that students in some classes consistently receive higher GPAs, is hidden.