I think the problem with government money for college is that we went demand side rather than supply side. States have a good history of building public universities that provided a great education at a great price and admitting students who could actually benefit from that education. Eventually, we shifted tons of money into providing loans and grants, which ultimately just arms both sides in a bidding war over the same set of seats for already existing universities. In general, when that happens, the price goes up and more suppliers enter the market to satisfy the demand. The problem here is that it's a lot easier to build a shitty fake university to soak up easy tuition dollars than it is to build a real university that actually educates people and has standards.
Worse, as more and more people are selected for seats in real schools, the remaining people with piles of federal cash burning holes in their pockets are, on average, worse and worse students. So building a good quality school with high standards isn't even necessarily the right thing to do even if your heart is in the right place and you're willing invest the money doing so. Ultimately, you just end up with a bunch of fly by night operations that specialize in separating vulnerable students from their loan money.