>It then became a vocational degree for the working class,
This may have been some policymakers' intent, but it never really became that. Universities and colleges resisted being seen as mere vocational schools, and refused to modify curricula for that purpose. You'd see all sorts of academic arguments about how teaching them to do a job would be wrong, that they should still be teaching them to "think" and have heavy course loads of liberal arts.
So parents and guidance counselors may have thought of it as vocational school, while getting the high-class university experience (as best someone of middling academic achievement can manage that) along with the high-class university tuition bills. Well, the guidance counselors didn't get the bills. Nor, in many cases, the parents.
>It's not sustainable, and just forgiving the debt only will make it
It's ok. We don't have to sustain it. The demographic implosion is well under way. We are at the point where elementary schools are closing (and everyone's making up excuses for this, so we can pretend that it's for any other reason than a demographic implosion).
>and less aligned with actual results we desire (useful workers).
At any point in history, most of the output from workers went (indirectly) back to the workers. If 98% of the workforce did agricultural work, this was because 98% or nearly enough of 98% of food was needed to feed those workers. Same for any product, no matter how tangible or abstract. Sure, there are exceptions... if people worked in a diamond mine it wasn't so diamonds would go to diamond miners.
If they don't need workers for the relatively small amount of food that is consumed by some small group, if they don't need workers for making garments (or building buildings, or any other thing) for the relatively amount of those products consumed by some small group, then they don't much need useful workers at all. Most of humanity is obsolete, or at least would be considered so if you belonged to a small group like that.