@Steve points out that this is a scarcity issue related to the education itself. The implied statement is that this plan is addressing the wrong side of the curve. Would a degree from an online institution which mimicked Harvard's curriculum, and administered the same tests yield the same result as attending Harvard? I don't know the answer to that one, but feel confident in asserting that Harvard (an others like them) enjoy the price premium and would work hard to defend it.

My bigger problem is in ascertaining whether the price run-up makes economic sense. Look at a school such as Harvard (I hate to be picking on them), but they basically have enough money in their endowment to let anyone attend. There will always be enough students who pay full boat that they don't have a problem. That said, with the endowment growth (the last 24 months notwithstanding), why does the cost of the education go up and up and up? Is it the new buildings? Are professorial salaries rising at the same rate? What are the cost components of these budgets that necessitate these increases?

Investing in education at a national level is surely a good idea, but you need some kind of market or legislative force to manage the expense.

At the core of this problem is that supply for quality higher education is limited. There are only so many good teachers, well-designed curriculums, etc, and because there is a lot of demand, the price of attending these organizations is high. The local community colleges in my area (Indiana) are very affordable (~$3k/yr tuition) and provide a decent education. I think the real problem, if anything, is the disparity between middle- and upper-class institutions.