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Dubbed the "Starterkit", the cash bonus aims to boost the intake of fifth-formers aged 10 to 11 at the school in Speicher in the state of Rhineland-Palatinate, the Trierischer Volksfreund said.
By end-February, the school, which faces opposition to the unusual initiative, must have at least 51 children registered but, according to the paper Sunday, had just 26.
"I don't know what's supposed to be immoral about it?" school head Juergen Weber told the online edition of the Trierischer Volksfreund. "It's tradition after all to support pupils and parents in the purchase of materials," he was quoted as saying.
Mayor Rudolf Becker described the controversial payment as the "cherry on the cake" and told the paper that even if 100 children were to sign up and they had to stump up 500 euros in each case, "we would gladly do it".
But the school's supervisory authority appears unconvinced.
"The path being tread goes in the wrong direction. The choice of school should not be made according to financial issues," the online paper quoted an official, Eveline Dziendziol, as saying.
Chancellor Angela Merkel warned last year that the ageing population poses the biggest challenge of this century to Germany.