“So, why did universities engage in this “natural experiment”?”
MONEY! A bunch more “students” on guaranteed student loans.
solution is NO government money to universities for anything at all including NO government loans. If USG needs the research done at Universities then the government should fund its own labs and hire the scientists but, outside of hard military needs, there is no valid reason for the government to be involved at all. The universities will then have to cut out all the frivolous and ideological courses and lower tuition drastically to something sane in order to not have to close down altogether.