FOR America's colleges, January is a month of reckoning. Most applications for the next academic year beginning in the autumn have to be made by the end of December, so a university's popularity is put to an objective standard: how many people want to attend. One of the more unlikely offices to have been flooded with mail is that of the City University of New York (CUNY), a public college that lacks, among other things, a famous sports team, bucolic campuses and raucous parties (it doesn't even have dorms), and, until recently, academic credibility.

A primary draw at CUNY is a programme for particularly clever students, launched in 2001. Some 1,100 of the 60,000 students at CUNY's five top schools receive a rare thing in the costly world of American colleges: free education. Those accepted by CUNY's honours programme pay no tuition fees; instead they receive a stipend of $7,500 (to help with general expenses) and a laptop computer. Applications for early admissions into next year's programme are up 70%.

Admission has nothing to do with being an athlete, or a child of an alumnus, or having an influential sponsor, or being a member of a particularly aggrieved ethnic group—criteria that are increasingly important at America's elite colleges. Most of the students who apply to the honours programme come from relatively poor families, many of them immigrant ones. All that CUNY demands is that these students be diligent and clever.

Last year, the average standardised test score of this group was in the top 7% in the country. Among the rest of CUNY's students averages are lower, but they are now just breaking into the top third (compared with the bottom third in 1997). CUNY does not appear alongside Harvard and Stanford on lists of America's top colleges, but its recent transformation offers a neat parable of meritocracy revisited.

Until the 1960s, a good case could be made that the best deal in American tertiary education was to be found not in Cambridge or Palo Alto, but in Harlem, at a small public school called City College, the core of CUNY. America's first free municipal university, founded in 1847, offered its services to everyone bright enough to meet its gruelling standards.

City's golden era came in the last century, when America's best known colleges restricted the number of Jewish students they would admit at exactly the time when New York was teeming with the bright children of poor Jewish immigrants. In 1933-54 City produced nine future Nobel laureates, including the 2005 winner for economics, Robert Aumann (who graduated in 1950); Hunter, its affiliated former women's college, produced two, and a sister branch in Brooklyn produced one. City educated Felix Frankfurter, a pivotal figure on the Supreme Court (class of 1902), Ira Gershwin (1918), Jonas Salk, the inventor of the polio vaccine (1934) and Robert Kahn, an architect of the internet (1960). A left-wing place in the 1930s and 1940s, City spawned many of the neo-conservative intellectuals who would later swing to the right, such as Irving Kristol (class of 1940, extra-curricular activity: anti-war club), Daniel Bell and Nathan Glazer.

What went wrong? Put simply, City dropped its standards. It was partly to do with demography, partly to do with earnest muddleheadedness. In the 1960s, universities across the country faced intense pressure to admit more minority students. Although City was open to all races, only a small number of black and Hispanic students passed the strict tests (including a future secretary of state, Colin Powell). That, critics decided, could not be squared with City's mission to “serve all the citizens of New York”. At first the standards were tweaked, but this was not enough, and in 1969 massive student protests shut down City's campus for two weeks. Faced with upheaval, City scrapped its admissions standards altogether. By 1970, almost any student who graduated from New York's high schools could attend.

The quality of education collapsed. At first, with no barrier to entry, enrolment climbed, but in 1976 the city of New York, which was then in effect bankrupt, forced CUNY to impose tuition fees. An era of free education was over, and a university which had once served such a distinct purpose joined the muddle of America's lower-end education.

By 1997, seven out of ten first-year students in the CUNY system were failing at least one remedial test in reading, writing or maths (meaning that they had not learnt it to high-school standard). A report commissioned by the city in 1999 concluded that “Central to CUNY's historic mission is a commitment to provide broad access, but its students' high drop-out rates and low graduation rates raise the question: ‘Access to what?' ”

Using the report as ammunition, profound reforms were pushed through by New York's then mayor, Rudolph Giuliani, and another alumnus, Herman Badillo (1951), America's first Puerto Rican congressman. A new head of CUNY was appointed. Matthew Goldstein, a mathematician (1963), has shifted the focus back towards higher standards amid considerable controversy.

For instance, by 2001, all of CUNY's 11 “senior” colleges (ie, ones that offer full four-year courses) had stopped offering remedial education. This prompted howls from the teaching faculty, who said it would “create a ghetto-like separation between levels of colleges”, keeping black and Hispanic students out of the best schools. In fact, the racial composition of the senior schools, monitored obsessively by critics, has remained largely unchanged: one in four students at the senior colleges is black, one in five is Latino. A third have ties to Puerto Rico, Jamaica, China and the Dominican Republic.

Admissions standards have been raised. Students applying to CUNY's senior colleges now need respectable scores on either a national, state or CUNY test, and the admissions criteria for the honours programme are the toughest in the university's history. Contrary to what Mr Goldstein's critics predicted, higher standards have attracted more students, not fewer: this year, enrolment at CUNY is at a record high. There are also anecdotal signs that CUNY is once again picking up bright locals, especially in science. One advanced biology class at City now has twice as many students as it did in the late 1990s. Last year, two students, both born in the Soviet Union, won Rhodes scholarships, and a Bronx native who won the much sought-after Intel Science Prize is now in the honours programme.

All this should not imply that CUNY is out of the woods. Much of it looks run down. CUNY's annual budget of $1.7 billion has stayed largely unchanged, even as student numbers have risen. With New York City's finances still precarious, city and state support for the university has fallen by more than one-third since 1991 in real terms. It has, however, begun to bring in private money.

A new journalism school will open in the autumn, helped by a $4m grant from the Sulzberger family, who control the New York Times, and led by Business Week's former editor, Steve Shepard (class of 1961). Efforts to raise a $1.2 billion endowment have passed the half-way mark, helped by (formerly estranged) alumni. Intel's former chairman, Andrew Grove, who graduated from City in 1960 as a penniless Hungarian immigrant, donated $26m (about 30% of City's operating budget) to the engineering school, calling his alma mater “a veritable American dream machine”.

There are broader lessons to draw from CUNY, especially to do with creating opportunities in higher education for the poor. Currently, only 3% of the students in America's top colleges come from families in the lowest income quartile and only 10% from the bottom half, according to a study by Anthony Carnevale and Stephen Rose for the Century Foundation. Most students are relatively well-off, and their numbers include plenty of racial minorities who receive preferential status independent of their economic circumstances.

For all its imperfections, CUNY's model of low tuition fees and high standards offers a different approach. And its recent history may help to dispel the myth that high academic standards deter students and donors. “Elitism”, Mr Goldstein contends, “is not a dirty word.”