SJS,
The story you post sounds sort of fantastical to me. Most of the Yeshivos in Lakewood do not actually give scholarships or very limited ones at that. But, you never said that the school is in Lakewood, so that may be a whole ‘nother kettle of fish.
I also find it unusual for a person to straight out say she would rather spend the money on luxuries especially in Lakewwod were for the most part people are not living extravagantly. I suspect that it is some indication of somesort of imbalance for someone to straight out say that.
I have a friend who was on the tuition committee of a LI MO school and people earning 300,000 would put in scholarship applications because they would have to take the family to Europe and they had a Mercedes and they were redoing the house. It would drive him nuts since he did without all the years so he could pay full tuition. And it bothered him that the scholarships were awarded.