The intention of the Blue Ribbon programming was to turn formerly troubled teenagers into model, upstanding students and citizens. Yet the Blue Ribbons frequently engage in overt jerkass behavior and even physical violence towards those not in their clique (see: the No-Holds-Barred Beatdown they give to Steve in the cafeteria), which would get them suspended from a normal school, if not expelled or even imprisoned. One of the parents even complains about how her son became a snobbish asshole after he entered the program.
But consider who created the Blue Ribbons. Dr. Caldicott is an utter asshole himself, brazenly lying about what happened to his daughter, and fancying himself to be god-like thanks to his technology. Given Caldicott's own attitudes, he probably considers the above to be perfectly acceptable behavior. And as for what happens when their programming glitches out and they go on murderous rampages, well, that's just a bug that's being fixed (just a few more lobotomized teens to go).
There is no way that the brainwashing could have any good effects later in life. It's anyone with a psychological or psychiatric degree's guess what the effects of the brainwashing herald later, but it cannot be good. Especially given that the programming goes haywire when the Blue Ribbons are sexually aroused... and how many attractive people in attractive clothes are they gonna see once they get out into the world? The fact that, so far, the only solution to these problems that they've come up with is institutionalization doesn't bode well. Mr. Newburry just killing them all may have been for their own good.
The climax shows Steve watching Rachel getting strapped in for her brainwashing as he gets dragged through the lab to be brainwashed himself. He manages to escape just seconds before he gets the chip implanted into his head, and then goes on to rescue Rachel. But wait. Rachel's brainwashing began a few minutes before Steve's, Steve managed to escape just seconds before he reached the point of no return, and he needed several minutes to find and save Rachel. Shouldn't it have been much too late for him to save her from getting brainwashed?