In the US, college is a common term applied to universities. You are thinking of "community colleges". That is a different story. (remember, Dartmouth "college" is a member of the ivy league)
Also, most ppl in the US only know of a few "top" schools. Some Americans never even heard of Vanderbilt.
Well, colleges are usually pretty small institutions. So for undergraduates, there are a lot of excellent liberal arts colleges around that provide excellent education. As for graudate school, because the emphasis is on research (usually, although not true for business schools), universities have a definite advantage.