See, what happened to those days was that gradually, colleges realized they could keep raising prices past what the government could pay, because they knew families of students could pay more. Colleges built palaces to "education", dormitories with gold plated faucets, gymnasiums, new buildings that were completely unnecessary simply because they could. All the while, tuition kept going up - the government saw that tuition was increasing at universities, so they'd raise the amount of subsidy, then the college would raise tuition above that to the point where families were bled just as much as before. Eventually, the bottom dropped out, the government said enough is enough, and held or dropped subsidies. Colleges, so used to 10% pay raises for tenured professors and unwilling to live with 20 year old dorms, screamed - "they're cutting our funding!" - so they just saddle their students with the maximum loan allowance they can - because they know they can get it - just to keep the gravy train coming. The more the government allows students to borrow, the more money colleges will charge.
It's economics at work. It's called Rent Seeking Behavior. If there is money to be gotten, it will be.
Here's a journal paper someone wrote on it.
Here's a bunch of resources on this from a think tank.