Great post. One point you missed, though:
Suddenly non-university vocational institutes were looked on as crappy and inferior, and it became a mantra (for no good reason) that you needed a 4-year college/university degree
It's the "no good reason" part that's the real problem - because there are reasons and they are good for some people, if not most.
First, there's an oversupply of workers for an undersupply of jobs, so why not be picky with your applicants if you're an employer? A stupid regulation like "4-year degree required" gets rid of more potential bad employees than it excludes potential good employees for many jobs. Part of this is that high school diplomas are merely attendance certificates now, but that's only a tiny part. A bigger part is a slowing of the economy, in real terms, since the early 70's, and a lack of real, good jobs. Stagflation was papered over with sheets of hundred dollar bills - the structural issues were never "solved" and still aren't. We're about twelve miles up on the structural Jenga stack at this point.
The result was a massive spike in the number of people going to 4-year colleges--that number has sextupled or so over the past 60ish years
Yes! There's your oversupply.
and a massive decline in the number of people going to vocational and technical schools
and there's definitely an undersupply there. Why? One is heavily subsidized and one is not. The one that gets the massive subsidies (grants, student loan programs below market rates, etc.) gets two things - an influx of demand, and a concomitant increase in price. It used to be 4-year students could work during the summers to pay for their tuition - but they didn't get Pell Grants, so that was awful.
Tech school prices are nowhere near as inflated, at least yet. People can still afford to go to tech school, and they're, in large numbers, starting to wise up about that. Let's hope nobody starts trying to heavily subsidize it.
But why did the US go full-on socialism with the 4-year student loan program, in particular? There's an assumption that if only the US can produce a huge number of university brainiacs then it can maintain its economic leadership position in the world, maintain its high tax base despite the competition from cheaper labor doing the same work, and therefore maintain its World Police stance. Because if it can't, China is going to eat the US's lunch, and that would be bad for the people in power. People in Power who have lots of university degrees and are, upon self-reflection, smarter than everybody else in the room, so the degrees must be causal.
Dirty secret: populations are, on average, just as smart from generation to generation, no matter how diplomas are being hung on walls.
Second dirty secret: a China-dominated world will cause the citizens of the US to be as miserable as the citizens of Luxembourg and Denmark are today. I'm just hoping the death throes of the Empire don't include firing shots at the new guy. I'm sure some school offers a degree in how starting unwinnable wars is good for an economy.