Specifically, I am talking about what is a bachelor's degree in the US--a 4-year-degree that offers you few special, unique, or licensable skills, unlike a masters' or doctorate or trade schools.
In my view, this field of higher education is mostly about gating access to a small job market--the supply of jobs is so limitted that people are (decreasingly) willing to go into debt for a crab-in-bucket's chance at some employment. It also perpetuates class divisions, more now than it did when getting a degree was a real ticket paid non-physical labor.
It's also a highly extractive industry in its own right--price of higher ed has outstripped inflation for over 30 years while professors are being paid less. People are entering there working lives deeply in debt. This is a systemic issue.
The answer, I think, is not simply gov't paying for tuition because that does not deal with runaway costs.
Higher education has a priveleged place on the left, since its where many of us gained a broader worldview. But setting that aside, the institution itself qua institution is deeply problematic in the current system.
My only unique contribution to the topic--which I have not heard anywhere else--is removing higher education as bona fide occupational qualification without justification as to specific content or skills w/o other options to demonstrate mastery. That would leverage current law (in the US) to dethrone higher-ed supremacy, because we know most jobs that require or prefer a bachelor's degree don't practically really require an education that takes 4 years.
The government paying for higher ed would be an absolute disaster. Right now the federal government is trying to withhold funding to pressure universities into spreading their ideological drek. If they also were paying tuition they would have even more power and influence to promote their poisonous world view.
The problem though will somewhat sort itself out in the not too distant future. Right now there aren't enough jobs for graduates and the costs are astronomical. Theoretically that will lead to falling enrollment rates which should bring costs back down. That or drive them up further as universities try to maintain profits with fewer students and turn education into more of a class issue than it already is. In either case the way our economy/society is shifting from knowledge work to physical labor will devalue 4 year programs in favor of trade certifications and shorter degrees.
There are several ways that might look. One might be professional degrees that only require course work directly related to a field of study rather than the more holistic approach we have now. Certifications from testing might also become more prevalent in some fields, especially tech. Another possible outcome would be increased value in the Associate's degree. It's mostly worthless today outside of some niche fields, but there is no reason a four year degree is needed for 90% of office work.
Really it will depend on the employers. Right now a bachelor's degree is the gold standard because most cognitive labor employers demand one. Without major reforms to how employers hire we'll be stuck with what we have now. If anything, based on how high the unemployment rate is for recent grads and people with less than 10 years of experience is the trend for employers to demand more education will only get worse. Right now entry level and mid level jobs are in short supply and receive hundreds if not thousands of applicants, so employers are tightening their requirements to filter the results more.
And that doesn't even touch on the problems AI creates. Students are using it to do course work, effectively nullifying the educational value of a degree. Employers are using it to filter applicants creating a cascading problem where applicants are filtered out by AI then use AI to massage their resume, which the employers AI then detects, and so on.
Breaking higher ed's monopoly on job qualifications is a great idea, I fear the people who could make that happen, employers, hold all the cards for now and there is little incentive for them to change.
Another idea would be to include student debt in bankruptcy. The problem is that we are generating a generation of slaves who will never pay their college debt, so it is the student that bears all the cost for the lies and cost overruns of the institution.
If--and I think Obama started to do this--colleges would not get their money, or banks would not get their money, there would be insituted more rigor into the loan application process built entirely around the probablility that the student would be able to make enough money to pay it back. How many of those loans would be issued today?
We'll see how the enrollment drop shakes out; I think you're right, the main effect will be a more stratified society as only people with cash will be able to get a higher education that will give them access to higher paying jobs.
I don't think things will go as smoothly as you think. Society is toxically positive and children are very suggestible. We give children who are not old enough to drink the power to take on life-changing debt. "What do I want to do for work?" is a hard question to answer when you have no demonstrable skills and no job experience, making college an attractive option for people without family connections in the trades.
I'd also add that the federal government DOES subsidize education to a high degree, and perhaps as much as it does so is how much it contributes to the theft of alumni.