Exactly. The authors of the Cellini & Goldin study linked to in TFA explicitly state that their findings do not apply to public colleges and private nonprofit schools. Better commentary here. (blog of popularly cited economist and White House staff alum).

Except that absent sufficient consumer demand to drive the economy, all the money "stuck in a savings account" or "invested in your 401k" ends up chasing business investment opportunities that simply are not there due to low capacity utilization: capital formation is aborted. Furthermore, as the economy slides further into recession due to depressed demand, incomes will fall and necessarily result in reduced savings. This second-order reduction in savings can, and by all accounts has, completely offset the initial rise in savings.

This is pretty much the definition of the Paradox of Thrift: increased personal savings leads to reduced consumer demand, leads to depressed economic growth, leads to falling income, leads to reduced aggregate savings.

The first weapon at the disposal of the Powers That Be to combat this is fiscal policy: reduce interest rates to stimulate investment. This is difficult when the short-term interest rate is already virtually zero.

One alternative is stimulus spending. I would argue that contrary to your statement, the conditions of the "21st century Western world" are uniquely suited to intelligently targeted and apportioned stimulus spending.

Alas, the intelligently targeted and apportioned bit has proven elusive, at least in the States.