I don't see any issue with that at all. Imagine how many potentially high achievers flounder away because they aren't surrounded by the right people and influences to succeed, because they couldn't get into university. Even freeloaders are going to learn something and be better people for it, and university might be free but everything else isn't, they will still need a job and be contributing to society.

Not to mention, money shouldn't be the barrier for entry to keep admissions in check if you want one. Viability should be. Universities already screen for good candidates. Change the screening to suit.

On top of that, you still have to be succeeding in uni to stay in uni

If a few freeloaders get a degree they don't need. Would society have lost anything but money?