It's enough to assume elites were greedy (and/or dense) and didn't consider long-term effects, you don't even need a decades-spanning conspiracy for it.
The elites won't be as fine once they realise much of their wealth stems from the rest of the republic, but that seems to be the circle humanity is caught in for eternity.
This seems to apply to all kinds of things - people, organisations, software, religions.
I guess as often in live, balance is important here :)
The reason colleges cost so much is that they've expanded their administration, facilities, and sports programs to soak up all of the available loan money.
I went to a state school that focused on STEM. The acceptance rate was low, class sizes were small, and the tuitions were reasonable. The buildings dated from the 60's. We didn't have extensive athletic programs, and our gym was falling apart. The school didn't spare expenses on things that didn't contribute directly to education.
We still had access to full machine shops, doppler radar installations, flow cytometers, BSL-3 labs, electron microscopes, wind tunnels, robotics facilities, and a boat load of really cool stuff. But it certainly didn't feel like an ivory tower.
Though our school wasn't losing money, the state board of regents decided to merge it into a much larger "liberal arts" school. This was done so that it could hit the student body requirements in order to qualify for building its own division I football program.
They built lots of fancy buildings for their dance program and theater productions. I can't even count how many stadiums and sports facilities they've constructed - it feels like two dozen! They're also purchasing lots of expensive real estate to enhance the size of the main campus. Meanwhile tuition has quadrupled and fees have gone up 1,000%.
It's bloat. That's why everything costs so much.
In the US they don't have that. AFAIK, there's no "Green Bay Packers U-18s" football team that is integrated with the professional club and promotes young players. Baseball does have a farm team system called the Minor Leagues.
The NCAA which runs university athletics in the US managed to make a junior league feeding all the professional leagues in various sports. The progression for an American athlete is then to get a scholarship to play at some university, and then get drafted by a professional team once they finish.
Student loans are government-guaranteed and cannot be absolved by bankruptcy. This IMO creates a perfect storm whereby under-informed teenagers can get massive loans they have no hope of repaying. Without the government/no bankruptcy components to this equation, the market would not support this kind of debt market.
Fortunately, this is easy to fix. There are two simple options (and probably many more complex ones):
1. Make it a free market. Make student debt absolvable by bankruptcy. Don't give government guarantees. Private loans will account for the viability of student's repaying those loans, while allowing bankruptcy helps ensure that unfair or predatory loans will be costly to the loan-issuer.
2. Make it a government service, like K-12. The government will actively manage the tertiary education market, thus making "the cost of college" a policy decision.
IMO the first one is not particularly desirable because it will limit college access to the upper socio-economic classes, further exacerbating wealth inequality and reducing social mobility. That leaves us with the second option, which is both straightforward to implement and has many case-studies abroad.
Looking at recent graduates are we sure that this system is truly preparing them for the realities of the real world and how to understand it.
Feels more to me that a whole generation is being scammed into paying for broken tools.