College is an aspect of upper- and upper-middle-class life (formerly) that has replicated on account of the status and advantage once conferred by the college degree. Now it's a requirement for a large set of jobs, most of which wouldn't even be considered desirable.
Is college a massive waste of time and money for a lot of people? Probably. I think it's useless and unfair to put a person through college and then have him end up in a job that does not involve the level of autonomy and intellectual challenge that college led him to expect. Since society has not evolved to the point where good jobs are abundant, it's hard to see any good reason for more than 5-10% of people to have college educations.
One has to examine the motivations behind the proliferation of higher education. The far left supports widespread college education under the belief that if lower- and middle-class people have the benefit of a liberal education, they'll demand good jobs and become "Angry Young (Wo/)Men" if they don't get them and, therefore, evolve into revolutionaries who will overthrow the status quo. The corporate right likes it because the colleges provide companies with a sorting mechanism, the costs of which are paid by the people being sorted rather than the corporate "users". The center supports widespread college education under the guise of increasing social equality. It's obvious that an idea with such support from both the wings and the center will be implemented.
Also, there are the goals of the academics. In the 1950s, professors widely believed that a merger between the academy and the larger capitalistic society would improve their social position. As they saw it, rule of society by educational institutions seemed to be the next logical step after rule by the church until the Enlightenment, by governments up to World War I, and finally by business corporations in the XX-c. They got their desired "merger" but Mammon, being larger and meaner, won and turned the academy to its needs, rather than vice versa.