First, why assume "subpar education"? One of the corollaries from my uncle's hypothesis is that there really isn't any secret held by some elite, nor there are

First, why assume "subpar education"? One of the corollaries from my uncle's hypothesis is that there really isn't any secret held by some elite, nor there are special resources to be distributed to students during class. Simply put, the more a group is segmented, the more the class will be appropriate to them as a whole. If anything, you are increasing "utilization" of resources. Second, there can be individual mobility. A poor performing student with otherwise potential to improve might receive help to overcome whatever is bringing them down, and get them to thrive again. Even in that case, it would help them to be in a smaller class, as it's much easier to identify who among the low performers who want to be helped, and those lost causes who are a drag for everyone else.