Why do they base it on family income? What if you have wealthy parents but they choose not to spend money on your tuition? Students are adults when they go to college - family background should be irrelevant.
My problem isn't even the family income decision, it's that the universities don't care how many children there are in a given family either.
My parents could've paid for my college education with some sacrifice (I paid for it, but they could have done so financially) if it were just me going to college. But I have two younger sisters, and there's no way they could cover all three of us.
When a large portion of students get their tuition money from their family, then family background can't be irrelevant, because it's relevant by definition.
I wonder if people still get caught in the middle with that - their parents could not have disowned them and could still be in a relationship with them, they just don't think that college is worthwhile or something so they don't want to contribute. But then as you say, what stops all parents pretending they don't think college is worthwhile. Which is why it could be better to not look at the parents income at all.