My understanding of the history (in the United States) is this. College used to be almost exclusively for the rich. Now, while there were always students who went to college as a stepping stone to the further study of medicine, law, or theology, there were plenty of rich kids — "legacies," they were called — who went only because they were from the "right kind" of families, and went only to network with others from the same social circles.
This is where the idea of a "Gentleman's C" comes from. You see, their lives were already pretty well set out. You made connections, graduated, and then went to work for your father or uncle, or your father or uncle's firm; or, married the daughter of a well-to-do family and went to work for your father-in-law.
But there has long been an egalitarian and meritocratic strain in the United States, and after WWII, as a way of saying thank you to those who had saved the world from Hitler, the GI Bill was started. This was a great success.
The GI Bill made it possible for older, generally more mature, and generally more motivated individuals to attend college. Interestingly, the "gentlemen" students, the anecdote goes, used to complain about these people as "DAB's": Damn Average Busters. Those on the GI Bill weren't satisfied with grades of C (whether real or given with a wink).
Now, here I break from the history to my own opinion. The former GI's were a special cohort. To identify them as merely middle and working class people benefiting from college, and from there to imagine that all (or nearly all) middle and working class young people could benefit from college just does not follow.
But, whether or not one follows from the other, it's a wonderful thing for a politician to promise, and just the kind of thing people want to believe. Promising to send the children of your constituents to trade school just doesn't have the same ring to it. So, it became college for everybody.
From here, I can pick up with what you're saying, and add that what you're saying jibes with what Allan Bloom said, way back in 1987, with his Closing of the American Mind. Bloom argued that middle class people are far more practical, economically — not having well-to-do fathers, uncles, and father-in-laws to fall back on; and because of that, colleges had to retool to become far more practical. In other words, many of the new degrees — at least at first — were closer to the aims of trade schools than traditional liberal arts curriculums. It seems like things were like that for a while.
Where I think it gets worse is that government money has created a bubble in higher education, a bubble that has created degrees which I term luxury degrees. These degrees are neither traditional college curriculums or glorified trade school syllabi. These are the so-called "navel gazing" or "basket weaving" courses. Maybe, if you were rich and lacked the ability to take over the family business, your rich parents might send you off to study one of these luxury majors, and that might make some kind of sense. Maybe you'd still meet a nice girl or boy, and then fall back on your trust fund. In any case, it would be their money and their business; and, in any case, how much of that sort of thing would there be? But spending taxpayer money to fund these courses of study and produce these degree holders is ludicrous. It is gross malinvestment, plain and simple.