Business debt is used for productivity and not just consumption. However, in both the case of business debt and sovereign debt, the return on the extra capital would have to exceed the interest rate on the debt.

I disagree with your analysis of public universities, however. The cost of university has grown substantially over the last 50 years with no real change in education quality. That implies there is some underlying reason for that cost disease. Besides, if everyone in the US goes to university, and the government pays for university education, there really isn't a change in who pays for tuition -- people either pay for it with a loan or they pay for it with taxes. At least if they pay for it with a loan they aren't forced to pay for someone else's education without receiving any benefit from it.