Of course, the university lost its way quite some time ago. Indeed, education in general has. But if we focus on the university, the basic question we should be asking - one that should inform all of our decisions and actions - is "for the sake of what?".
What is the university for?
If you ask most people, perhaps especially since the War when university attendance exploded, the answer will likely be "to get a job". So, the university, it is supposed, is primarily an institution centered around career training and preparation. Indeed, if you grew up during the last half century, you might have grown accustomed to hearing a certain negative encouragement to attend university, namely, that if you wish to avoid working at McDonald's - which is taken to be the worst fate imaginable - then you must have a college degree. This was an unquestioned iron rule that insinuated a certain conception of the primary purpose of unviersity education. In communities dominated by blue collar workers, the university was sold as one's ticket out of the ostensibly dreary world of manual labor into the ranks of the white collar professional classes.
(Gen Z begs to differ; interest in the so-called trades has increased by 1500%.)
Now, assuming university education is job training, we might wish to ask whether they are effective at this task, especially given the astronomical costs of tuition to which students are yoked after graduation. Here, the answer is far from clear and one suspects negative for most graduates.
Even so, the concept of university-as-job-training-center itself is a debasement of the original purpose of the university. The primary purpose was historically embodied by the liberal arts, which is to say, the free arts. These are opposed to the so-called servile arts. Guess into which "job training" fits best. The liberal arts as originally taught were not the liberal arts as we imagine them today. The foundation of what you might call undergraduate education was the trivium and the quadrivium. The first taught grammar, logic, and rhetoric in order to prepare students to be able to reason, evaluate arguments, and to make arguments themselves. It freed a person by developing basic intellectually competence. In the second, students were taught arithmetic, geometry, music, and astronomy. Despite what are for us today some strange names, these prepared the student for quantitative reasoning: quantity as such, quantity in space, quantity in time, and quantity in space-time. From there, students continued onward to study philosophy, medicine, theology, law, and so on. The purpose of these liberal arts was to produce a free man, free because he is enabled to pursue the truth.
Even the so-called research university demotes the primary function of the university by making pedagogy a kind of afterthought or concession. Eduating students is secondary; the primary aim of faculty is research.
Of course, people used to attend university at the age of 14, the age at which we typically enter secondary school, so the boundaries have shifted, but I would nonetheless argue that education - and especially the university - should return to its roots as an intellectual community of faculty and students oriented toward producing free human beings capable of seeking the truth. Research should take place in dedicated institutes. Students are a long way from research anyway, which in any case tends to be specialized. The trades should be taught in trade schools and institutions focused on producing competence in those areas. Institutional function should be clear so that an institution can acheive its end successfully instead of trying to be everything and nothing. Focused study of specialized academic fields should be postponed until postgraduate study.