I know multiple trends that address your paradox, and I do not know the relative importance of them.
The first is that the savings rate has dropped significantly. People who do not save can purchase more goods with the same income. (At least in the short term.)
The second is that due to widening income disparities, the ratio in earnings between the median family and the top fifth has increased. Therefore college has not become as proportionately hard to afford for the top fifth as it has for the median.
The third is that the increasing income disparity has come with widespread recognition that a college education is a good way to improve your odds of being in the top fifth rather than the bottom half. This makes education proportionately more valuable. People are willing to spend more on things they value more.
Fourth, the structure of financial aid has changed. It is less often true that students pay the full sticker price for college today than historically. And the poorer you are, the more likely you are to get a break. (Harvard's policy being an extreme example.)
And last but not least, in a very different tangent, income disparity leads to an increased fraction of consumption being accounted for by a small fraction of the population. So changes in total consumption do not necessarily indicate changes in consumption for the median.
The particular paradox I'm describing is not limited to college - it applies to virtually all goods and services. So any college-specific explanation is incomplete.
It's also not limited to any strata of income - the poor today have more goods and services available than the middle class of 1970. This casts doubt on explanations based on inequality.
Decreased savings might explain things, though I think in the long term it would cause inflation. Would need to think about it.
The first is that the savings rate has dropped significantly. People who do not save can purchase more goods with the same income. (At least in the short term.)
The second is that due to widening income disparities, the ratio in earnings between the median family and the top fifth has increased. Therefore college has not become as proportionately hard to afford for the top fifth as it has for the median.
The third is that the increasing income disparity has come with widespread recognition that a college education is a good way to improve your odds of being in the top fifth rather than the bottom half. This makes education proportionately more valuable. People are willing to spend more on things they value more.
Fourth, the structure of financial aid has changed. It is less often true that students pay the full sticker price for college today than historically. And the poorer you are, the more likely you are to get a break. (Harvard's policy being an extreme example.)
And last but not least, in a very different tangent, income disparity leads to an increased fraction of consumption being accounted for by a small fraction of the population. So changes in total consumption do not necessarily indicate changes in consumption for the median.