OK, so if we take 10,000 kids crammed into a little red schoolhouse and build a 10,000 university campus with a $10 Billion investment we haven't increased the supply because no more kids are in school? Please.
Not all of the increase is in State Universities. ITT Tech institutes and online universities and other nontraditional educational establishments have sprung up to get in on some of the hugh and series money the Feds throw at "higher education". Those places turn a profit compared to investment that would make Exxon-Mobil blush.
One fact of business life is, if someone offers you more money for the same product, everyone's price goes up. The product doesn't get any better but the margin improves.