"find a better mechanism by which people can network and signal their abilities. Leave universities to be attended by people who actually care about the material and who actually use it as an interactive experience for which it's best suited."
Then you're going to have fewer truly educated people than you could have if you didn't give up on them. Other societies with much better education systems than the US show that it is possible to bring more people aboard.
It will take a reform of the education system, but not a reform that caters to the lucky few who love to learn, but rather one that encourages the love of learning in more people.
The solution that better countries have is actually pretty similar in spirit to what I proposed. Germany:
1) Provide valid alternatives to credentialing (e.g. a good trade school path), so they've drained off demand for university-style credential.
2) Strictly limit who can go by a test, so you don't have people wasting their time there.
3) Strictly limit how much they can charge, so they don't compete over providing runaway bloat.
Yes, there has been a change in the purpose of higher education in the U.S. As you say the credential is the goal and not knowledge. This is especially so at urban community colleges. All I can do as a teacher at a community college is try to give them as much knowledge as possible. It’s a hard job. I can’t change the underlying causes of the problem. I’ve got to do what I can with the situation I’m confronting.
The "cure" is to recognize that you're solving the wrong problem.
Universities originated when there were highly motivated learners, actually interested in the material and taking an active interest in peppering the lecturers with questions.
Today, it's de facto purpose is to get a credential and network with useful people. Learning the material is almost entirely orthogonal to why they're there, so of course they're doing the minimum to pass (or receive a high enough grade).
Trying to get the students interested in the material is just digging the hole deeper. The answer is to stop digging!
Specifically: find a better mechanism by which people can network and signal their abilities. Leave universities to be attended by people who actually care about the material and who actually use it as an interactive experience for which it's best suited.