Oh, you really think this doesn't happen. Where I (in Australia) the conditions you paint were accurate for most of my life. In fact they remain accurate for Australian's attending Australian educational institutions now for the most part.
But about 20 years ago, Australia decided to adopt the US model for education - educational institutions should compete for student dollars, just like your local coffee shops compete for customers. This boiled down to allowing educational institutions to charge students what they wish for educating them and the money the government used to give the educational institutions would go to instead low cost loans, and upfront payments for enrolling students so the they didn't pay full price. It sounds reasonable on the surface, well worth a try.
But it was insane to try it in Australia because it has already been tried in the USA where the result was the student debt fiasco. The end result in the lower levels was exactly the same as in the USA, with educational institutions preying on student naivety giving away laptops in return for signing up to very expensive long term courses. Very few completed the courses, so they didn't get that long term money, but they didn't incur the expense of educating anyone either. They got the bulk of their income by getting the government money for signing up the students. The cost was advertising and the giveaways like the laptop. To your point, when the government attempted to clamp down by paying only for graduating students, they simply graduated them regardless of their grades. The model has since been abandoned, of course.
This predatory approach didn't work in the Uni's. I think Uni students and their parents are in general too smart to fall in a long term debt trap, and rendering Uni Bachelor certificate meaningless scared too many people - business and governments alike. But they could and did, and do play the same game with overseas students. Professors are under immense pressure to graduate them, so they get the degree they paid for. There I've seen first hand Professors (Professors in Education no less), sit down with an international student and re-write their assignments for them so they could pass them. They despised it. But the government had reduced funding of local students to force them to become "lean and mean", so to survive they had no choice.
You don't hear about this a lot because everyone involved on the education side is literally trying to keep their job. Broadcasting the educational institution they work for hands out worthless grades undermines that, so it's a conspiracy of silence.