The model has not really eroded. It just became more obvious that some people had assumptions that were always wrong.
In some circles, it was popular to assume that academic degrees are supposed to be job training instead of education. And then that got interpreted narrowly as the skills you need in your first job after graduation. But a full career is 40+ years. Even when the job market was not changing as quickly as now, nobody could predict the skills you would need 20 years later. If you bought that viewpoint, you spent years preparing for the first few years of your career, which was obviously wasteful.
The actual value proposition was already stated 200+ years ago:
> There are undeniably certain kinds of knowledge that must be of a general nature and, more importantly, a certain cultivation of the mind and character that nobody can afford to be without. People obviously cannot be good craftworkers, merchants, soldiers or businessmen unless, regardless of their occupation, they are good, upstanding and – according to their condition – well-informed human beings and citizens. If this basis is laid through schooling, vocational skills are easily acquired later on, and a person is always free to move from one occupation to another, as so often happens in life.
https://en.wikipedia.org/wiki/Humboldtian_model_of_higher_ed...
Of course, colleges can be made more cost-effective by focusing more narrowly on education. For some reason, American higher education ended up being weirdly collectivist in an otherwise individualist culture. The ideal college experience became a separate stage of life between childhood and adulthood. You live on a campus outside the real world, and that campus is located in a place few people would otherwise move to. The incentives got weird, and colleges started prioritizing aspects of the college experience that are not directly related to education.