Back in the "good old days," an educated populace was a source of communal pride. Providing everyone with the opportunity to try (and the opportunity to fail) to better themselves through education used to be a way to reward individual initiative and merit. It's why we have land grant schools and the GI Bill. "State" schools were actually funded by the states; they'd let anyone in; and many of them would fail.
Now, it seems that education has become an individual benefit for which the individual should pay. Nobody wants to pay to educate his neighbor's dumb kid. State support for "public" universities has dried up, and they depend on tuition to keep the lights on.
They have discovered market forces. Faculty can bring in more money doing research than teaching students. Students who flunk out don't pay tuition, so retention has become a major issue. Keep the customer happy, comfortable, and hopeful. Don't fail them just because they struggle with a few concepts.
Of course, it used to be that success in college was a good indicator of competency. If (almost) anyone can get a degree in exchange for tuition, then the degree loses that value