This is what's wrong with our education system. Who cares if anyone is actually learning anything, get those useless metrics up!
Employers seem to disagree with you about the usefulness of that metric.
When being able to get a job depends more on what piece of paper you have than what knowledge you have, that is no longer a useless metric.
Students and colleges are responding rationally to what the employers are demanding.
Of course, once they made "college degree" a proxy, everybody on the production side responded correctly and reduced into to its core essence as you said: "pay for this piece of paper and who cares about quality since an interview won't test me anyway".
If it actually mattered, the most rational action is for employers to either 1) interview people without college degrees or 2) train people without college degrees. The fact that neither of these is occurring tells me that the employers aren't really that bothered by the current situation.