If we reduce college attendance drastically, it may be necessary to maintain high end (cutting edge) universities. Otherwise only those with promise and wealth could go.

Sure. But why federally funded?

Because colleges in this hypothetical would serve the common good and the population as a whole would benefit from it's existence. How are you proposing colleges be funded?

They're currently funded many different ways: federal grants, federally subsidized loans, government (both state and federal) subsidized savings accounts, state funds, various scholarship charities, loan forgiveness programs, endowments, etc. Seems like centralizing all that money and decision-making ability into the hands of the President and the U.S. Congress would be a net loss.