The conversion of polytechnics to universities wasn't the problem: I was at a polytechnic in the mid 80s and got a grant cheque, as did most (all?) of my friends. Polytechnic students got grants just like university students. Courses were free to students: nobody paid a penny in "course fees".
It sounds like I am about ten years older than you, the generation that looked on in shock as the concept of students paying course fees was introduced. We were upset when grant cheques were gradually reduced to zero before that.
I was from a middle class background with both parents working, so definitely not a poor student. But I got all my course fees paid and some living expenses paid by the government (to cover rent, food, books). I seem to remember it was on a sliding scale at that time (mid 80s) which was a recent change, with less paid to wealthier families and more paid to poorer families. But I am pretty sure I remember it covered all my rent money at least, it was a big enough cheque that my mum worried I was going to blow it all on booze and parties and random nice things and not put it in the bank to cover my rent and food!
Industrial scholarships existed but were a different thing - those guys lived like kings while they were students.
I suspect one of the arguments that might be offered is the increase in the number of students over the period from 80s to present making it more of an expensive proposition to fund. However, I suspect it also might be a political model: the right wing governments in the UK are very keen on a US model of funding, rather than a social democratic European model. I can't say whether a higher percentage of UK 18 year olds go on to study at undergraduate level than those in say the Netherlands or France or Finland, but there's definitely a different funding model between the US (leave college with $100K debt) and some European countries (course fees much lower than the UK, potentially leave with low to zero debt).
