When I was in college in the 1980s, we had smaller, less-desirable dorms . . . and we had newer suites with nicer amenities. Think about it. It makes sense: The college built its first dorms back when the college was new . . . and at that time they were "state of the art". But as time went on and people began to expect more privacy, more space, better storage and so forth, and as the college grew and needed more dorm space, they built better accomodations. Someone still gets to live in the older dorms (for less money) and someone gets the new, swanky rooms (for more money). The college my daughter will attend next fall has about eight "categories" of rooms, each with a different pricetag. Perfectly logical.
Choices are good. If we're the family who can barely afford to get our kid into college, I want the option of the cheapest possible room. Or, if she has to have that oldest, dumpiest room because freshmen take what they can get, fine. She'll "do her time". But if I am willing to pay $$$ for her to have a newer room with a more private bathroom or a sitting room shared by just a few students, that's a good choice too. It's unfair to say that everyone pays the same price, if they don't all get the same quality of room.
Also, keep in mind that quality of the rooms (floor space, walk-in closets, carpet vs. tile) isn't the only measure of a dorm room's value. At my college, we had dorms on two opposite sides of campus (and academic buildings in the middle); each side of campus had its own cafeteria, but one served vastly superior food. However, the other side of campus was more convenient to . . . everything. So in addition to what kind of room you wanted, you had to decide whether you valued location or food more.
As my oldest and I toured colleges last year, we saw dorms with varying degrees of quality, so I think this is still pretty standard.
At the university I attended, returning students had "first dibs" on dorms -- so long as they met the next-year's-room deadline, which was something like March 1st; incoming freshmen were assigned to rooms starting around April 1st. My brother went to a different school, one with fewer dorms and a completely different housing philosophy: All freshmen who were accepted by X date were guaranteed housing . . . and once they were all assigned a spot, only then were upperclassmen allowed to enter a lottery to see who'd get a dorm and who'd be apartment hunting. Schools have different manners of handling limited housing, but I've never heard of one that did everything completely by lottery or luck.