Wow! I can't believe the audacity here on your sister's part! I hope she is truly sorry for bringing her feelings so out in the open, when she easily could have confronted you privately!
Btw, I went to an expensive private college, got great grades, double majored, did some awesome internships and guess what, I'm a happy, happy, happy stay-at-home mom! lol!!! (Ok, well that's as of recently, but still. . . life is 1% inspiration and 99% perspiration... great pedigree doesn't make up for a hard worker in most cases).
People make what they want out of their own lives -- even they aren't realizing it at the time! Whether or not your kids go to state college -- whether or not they have to pay for it on their own -- will not make or break them. Whether or not they have a goal or dream to focus on will be a bigger factor. IMHO.
KTeacher, all this being said, I hope you two can mend any damage this has done. Maybe it will open a line of communication for you... realizing that she has issues of jealousy and resentment toward you -- and who knows what else.... may you two be able to work it out -- privately and tactfully and have a better relationship for it.