My brother-in-law spent two years teaching intro psych at UT Austin and this very policy tended to give him students that could barely read. Remedial education is the most effective and appropriate treatment for low-performing students, regardless of how well they excelled at their shitty high schools (and remember: we're talking Texas, dead last in the nation.)
The problem with the approach taken in the article is it penalizes students who actually have their shit together. I got an engineering degree at a school with an engineering department that ran about 70% foreign nationals. As a result, I had to take two ESL courses - had to pay for two ESL courses - in order to graduate. Yeah, we called 'em "tech writing" but they were basic english proficiency for foreign speakers and everybody knew it.
And then you get into the issue of grade inflation. According to College Un-Bound, A's now account for 80% of all grades granted in undergraduate courses across the nation.
So while I feel for poor Vanessa, with her 3.5 GPA and 1000 SAT from Mesquite HS in Texas, and while I'm sorry she failed her first test in Stats 101, I don't think the problem is one of self-esteem. I think it's one of entitling students who can successfully climb a shitpile ("At Mesquite High, she never had to study for math tests; she aced them all without really trying") to a sherpa-ride to the top of the mountain.
At some point you have to let the kids in on the joke:
I mean, that's just disrespectful. They already know they're in because they beat their classmates, not because they can compete nationally. Now you're going to put them on the Short Bus without telling them it's 'cuz they're poor? That's some White Man's Burden shit right there.