> If students had to pay the actual cost of their education, it'd be much higher, even in Ivy League schools.

That seems really unlikely. The fact that it's expensive to provide this exact bundle of services doesn't mean that's what would get provided without the subsidy. What's more likely is that the services that mean the least to the customers would get cut until the tuition was more reasonable. Without tax funding you'd get schools that were focused primarily on teaching. Like high school, but with more accomplished teachers.