I don't think college got any better or worse, it is primary and secondary education that seem far worse. At some point it became less and less acceptable to tell anyone they sucked or needed to get their shit together because it wouldn't fly. I think there are a larger number (there were always people like this, just fewer of them) of young people today who are completely incapable of coping with failure because they've never been challenged or had to face adversity. The system just rolled over for them and let them through no matter how poorly they did.
It's not just idiots (but there are still plenty of those) either, but also smart kids who just can't handle a challenge because everything got so dumbed down they've never had to rise above a really low bar. Eventually they hit college or the real world and suddenly find life turned up side down. Big fish in little ponds being suddenly lost in an ocean and there's no ribbon for trying your best if your best isn't good enough. Because it became unacceptable to hold anyone back, everyone ended up being held back.
Big education gets paid either way, so its surprising that they care as much as they do, but I suspect some of that comes down to enough people who want to be good educators working around the system. Some professors don't care much about that, but they might do some cutting edge research and cultivate the next generation of research professors so I suppose there's value there. Regardless, it's a mess in that some fields are so competitive in terms of available jobs that it makes little sense for some more expensive universities to have those programs because unless those students are already wealthy they shouldn't expect to be able to pay off the cost of their education for decades with current job prospects in those fields.
I don't think college is primarily to blame, and to some degree it's always been more of what you make of it than anything else, but I suspect they're starting to eat the shit sandwich that's been pushed through the education system and are probably passing the buck a little themselves. It probably varies by university and program though as colleges were always a bit of chaotic fiefdom and tenured faculty could always tell idiotic administrators to go piss up a rope when necessary. Maybe degrees did get watered down, but it probably isn't anywhere as much as people would like to think. Maybe you just work a company that can only attract C-level college talent and all the highly motivated 4.0 students aren't bothering to apply or interview there.