RE: University trilemma: Fundamental issues
Integrating current technical advances into educational curriculum would alleviate the cost burden to the state and the student. Though it is aesthetic to have magnificent libraries on campus, the same quantity and quality of materials can be transferred to digital format for access, reducing the support cost for maintenance of physical libraries and physical books. Furthermore, many of the lectures can be recorded and digitized for students to view, while the professors can devote more time to research and small group discussions, having freed from daily hour-long lectures. In addition, even the small groups can be conducted via virtual meetings, freeing the student from the cost of living on campus.
More important is the purpose for the university system as conceptualized by the State. In the West, the purpose of university degree seems to have become a rite of passage into adulthood, rather than a certification for qualification into the state civil service and academia. As such, it seems that the standards of university education have degenerated to mediocrity. Furthermore, there seems to be an irrational faith placed upon mercantile companies and systems over state institutions in meeting the needs of a society. While I can understand your consideration of private universities as being an "option" for higher education, the results of for profit universities in the education sphere indicate that they offer little to no value to those who attend these places. In fact the for-profit universities disproportionately disadvantage the unqualified by enrolling them in their service and burdening them with enormous debts.
The social paradigm of university for every student need to be abandoned, if the society desires a competent civil service bureau and academic research with integrity. The constant lowering of standards to accommodate the unqualified results in worthless degrees and societal discontent.
It is qute costly as well, though. I have that kind of infrastructure at my place, maybe not so advanced, but better than most, and it does cost a lot to maintain. I don't know the exact numbers, but I heard what different components of that infrastructure cost. There is security, there are data centers, computer rooms, electricity, etc. Lots to pay for.
I personally don't agree that the state decides what a university degree is, nor do I believe that universities perpetuate the situation. They do "sell" it to the masses, but it is the masses that can choose NOT to buy it. Yet we keep buying it. To me, it is a simple supply-demand situation where people come and give you their money for a piece of paper you are happy to provide. A service economy, if you will.
The only fault of the state here is not doing anything about it. That said, they can't do much about it because of the 3 factors I described above. It is a vicious cycle. People also feel locked because university degrees do increase your marketability. That, and the fact that we always hope somebody else will do it for us.
The reality is that things will only change when people back their opposition to it with action - by not actually investing any more money into university education. While I am skeptical about it happening any time soon, I do think it is the kind of "peaceful" revolution we need. Forcing universities to change by simply not giving them your money. Brilliant!
I think if we compare the digital vs. analogue storage of information, multiple lecture halls vs. online/cloud-based lecture access, multiple small group space vs. third-party conferencing software the costs for the university would decrease significantly. There would not be a need for a computer lab, as the students already own computers or tablets with which they can access university digital resources. For scholarship students the university need only lease older tablets for the students to use.
University system was initially established by the Crown to provide a consistent supply of literati to the candidate pool for the budding bureaucracy. The university system was not intended to educate every subject in a kingdom. Somehow, the university system became the modern-day distortion of a daycare center for young adults. I think we differ in the opinion regarding the function of a university: I perceive it as an appendage to the state bureaucracy, you seem to perceive it as a general public good.
I think the current university system have become more of a mercantile industry (a service sector, as you put it) rather than semi-autonomous government bureaucracy. I have a very dim view of merchants, and their profit-driven purpose perpetuate dissemination of useless degrees at exorbitant price.
Like you, I perceive the solution to be government intervention. Returning the university system to its original purpose may provide a solution, but that would not be in accord to your desire for a universally educated citizenry.
Government bureaucracy can be very frustrating when it comes to learning. I have witnessed disproportionately high expectations for student assignments. This led to stress and depression among students.
I have many student friends. Most of them chose a narrow area of study. Modern curricula allow this approach (not in all specialties). I believe that a person himself should strive to learn new things. It happens that the academic load increases sharply. then I advise you to separate some of the secondary tasks for the service here. This is a normal practice in a world where much knowledge can be obtained through online resources.