OK, after thought and some checking, assuming that this *is* a Synchro skating team (and her comments point to it), I think it is a different scenario than I first guessed. (And yes, I'm having fun guessing, but Synchro is an unusual sport that doesn't operate with the same type of selection process that most team youth sports do, so with Synchro the usual youth sport expectations don't quite apply. Besides, the more people who hear about Synchronized Skating, the better, because it is a really fun thing to watch, and a great option for skaters who will not be individual champions. BTW, while Synchro is a mostly-female sport, it is fully open to male participants; we just don't get that many at this point. That will almost certainly change if the sport is added to the Olympics for 2022; that decision will be made by the IOC this month.)
In Synchro skating, the usual difference between a club team and a rec team is kind of mushy. Most of the time the rinks are owned by a local government, but the team skating programs are run by private clubs that are home-based at that rink. The club's coaches may or may not also be local gov't employees, and the club provides coaches for the public learn-to-skate programs that the rink hosts. Most kids who go through the learn-to-skate programs and want to go higher then join the club in order to compete. The club has a contract to pay for ice time for members, which insures that the local govt. has a steady stream of income to help with maintenance costs. FWIW, high-level Synchro is an expensive sport to run; our club fields 7 teams (3 of which are national-level), and the program budget is well above $100K. Each national-level skater's annual team fees are about $5K, which includes competition costumes, team ice time, travel expenses (except food, with is paid separately), and team coaching, including special workshops. It does not include skates (which are at least $300/pr), practice or travel uniforms, private practice ice time (minimum 3 hours per week, at about $10/hr), testing fees, dance classes, or private coaching, which is at least $60/hr, and the team requires skaters to have at least a lesson a week.) The extra individual costs usually run an additional $2K per season for each skater. (USFSA and clubs do fund grants to help pay for skating for kids who are talented but don't have the family money to compete.) There is no NCAA figure skating program, so no athletic scholarships; college teams are almost all club teams, though there are a few colleges that fund varsity teams. The season runs from October to April; the average team will compete about 6-8 times per season. Tryouts are normally in April, and the competitive standard is that every team member must try out every year, there are no bye-spots. Practice begins immediately after acceptance of offers in May, but doesn't go to full schedule until August. Regional-only teams will normally practice 1-2 hours per week, nationally competitive teams will practice anywhere from 6-20 hours per week, depending on level.
Here is an example scenario that fits the OP's question. I don't know if this is the program the OP was posting about, but it might be: there is a program in the South that is currently on a big push to go from what was a essentially a very good-quality rec team to a national competitor. Two clubs consolidated their Synchro programs, then hired a new coach who is quite young, but not quite just out of college; she is about 27 years old. One of the oddities of figure skating (and particularly Synchro) is that you can be in your mid-twenties and have over 10 years of paid coaching experience, which this coach does. (This is because many serious figure skaters often start coaching young children at age 16 to make money to pay for skating expenses. It's very common for them to coach all the way through college, even if they are skating on a competitive team at the same time, because young coaches normally make about $30/hr giving private lessons.) All of her assistant coaches there are quite young as well, some of them still in school.
So, why didn't the other 2 seniors make the top-level team: the most likely reason is that the new coach is trying to take the program to a nationally-competitive level, and has added a higher-level team than the program previously fielded. That team has a higher minimum Moves in the Field test requirement, and it is probable that these two skaters haven't passed it, and are unlikely to pass it before the October 1st deadline for this season, and are thus ineligible. This would definitely fall into the category of something that would have been prepared for if it were known, but if the packet explained that the program was going for national competition levels, then it would have been simple to look up what the USFSA requirements would be in order to make a national-level team in that age range. The thing is, it is only in the past 4 years or so that USFS has gotten really strict about testing for all team levels, it used to be encouraged but not required, and we've had a hard time getting it through to younger skaters that failure to pass the test means that you won't be on the team, even if you can do all the moves in the program. (I'm really not getting the "top 10%" thing. I very much doubt that was a stated objective; it's likely that it just fell out that way.) For the program I mentioned above, the new top-level team has a test requirement that is 3 levels higher that that of their previous top-level team. The tests are required to be taken in sequence, & it is a nearly impossible feat to pass 3 higher MIF tests in less than one year. If these skaters had not already been independently pursuing higher test achievements than were previously required, they simply could not manage the needed preparation in the time available.
About Testing: In figure skating "testing" is a technical term. Tests don't happen at tryouts. Testing is a formal process that all USFSA competitive skaters must go through to prove that they have mastered certain skills & program elements; the test level you have passed determines what competitions you are allowed to enter. For Synchro, each team level (there are 14 levels, and some overlap by age &/or skill) has a minimum test that all team members must have passed to be allowed to be on the team. Skaters can re-test every 28 days, and you can try as many times as you need to to pass, but some of the tests are quite difficult; it is not unusual for a skater to put 20 hours of individual practice in weekly for nearly a year just to prepare for one higher-level test. Synchro teams require the Moves in the Field series of tests, but there are 4 other test series, Freestyle & Pairs (which includes the jumps), and 2 series of Ice Dances; truly elite Synchro skaters test some of all of them except Pairs.)
PS: I am pretty sure that when the OP spoke of residency, she meant state residency for the college that the skater plans to attend, not the skating program. It sounds like she won't be attending college there if she doesn't qualify for in-state tuition, in which case one more slot will open on the team. Her having made the team is a simple matter of ability; if she had the test level and impressed the coach during tryouts, she would have made it fair & square. (It's common for kids who are planning to move to an area to audition for a Synchro team there months before they move. Elite teams draw from all over the country at the upper competition levels, skaters often try out for one of those teams with the plan of attending college in that area only if they make the team.)
(Edited to remove some TMI details. )
