Good point. In the best of all capitalist worlds, people will purchase the superior product. Remember that in Adam Smith's time the students paid their professors directly, with no administrative middleman in between.
The change came during the 60's and 70's, much of it as a result of the various "Civil Rights Acts" and the Griggs v Duke Power Co decision, which made it far harder for tests that had "disparate impact" (ie, fewer blacks pass) be used in employment decisions.
After that, a college degree from a good school became more valuable as a way to get past the HR gateway, which means that to an increasing degree those who control the colleges, also control who gets a good job and advances into positions of power
Take away the Civil Rights Acts, allow employers to hire whom they please, and you would see a trend for employers to hire bright young people fresh out of high school, and let them persue the education on a part-time basis over the course of their careers. In such an environment, the power of the Left would be greatly diminished