Not living within one's means is the problem: now beginning with the choice to attend a college or university well outside your (and your family's) ability to pay (taking your scholarship aid into account). For those with ordinary middle or lower middle class means, 40 years ago, college meant two years living at home and going to the local community college, then transfering to the best public school one could get into in one's home state. That's still the route sensible people take.
Increasingly, however, there is huge pressure to attend a residential college/university for all four years and, especially in the eastern US, to attend a private college or university. (Admittedly, the eastern state universities don't have the prestige of some of those in the midwest or far west (or Virginia and North Carolina) that rank among the top 50 research universities nationwide, but still....)
While there is an argument to be made for paying the cost (even by borrowing) of elite colleges and universities -- mostly because of the contacts you can make and the opportunities they provide -- I have always thought that below that top tier of some 50 universities and 50 odd national liberal arts colleges, it made little sense to go to a private college or university rather than a public university. While I think that the many many smaller private colleges are run by sincere people who are doing the best they know how, I honestly believe that they do their students a disservice when they are priced at or just below the level of the top tier institutions without being able to provde the benefits.
You are absolutely right. But I would go farther. Most employers couldn't care less about where someone goes to school. They may want a college grad, but rarely do they care what college or university granted the degree. The exception would be in certain highly specialized fields where the school does make a difference. Only a handful of universities and colleges make any difference whatsoever to employment prospects. Going into major debt to attend an out of state institution is almost always a huge financial mistake.
Interestingly, a person's G.P.A. -- a big deal in college -- is seldom an issue in employment. In the course of my former career, I've looked at hundreds (maybe thousands) of employment applications from a variety of companies. Only a handful asked for a G.P.A.
I notice that too. WHen I was going to college, almost everyone I knew went locally. Some people went to the local community college and then the local 4 year college. Going out of state wasn't very common.