Loosely, jobs which pay poorly have a lot of labor supply relative to demand and jobs that pay well have a lot of demand relative to supply.

If you artificially change the price of degrees to match the expected lifetime ROI of that degree, you are decreasing the barrier to jobs that we already have too many people attempting to do and increasing the barrier to jobs we need more people to do.

Of course this analysis overlooks that some jobs are "good for society" on some metric, but no one wants to pay for them. But then the approach should be to directly incentivize those jobs eg through grants or government-funded work programs.

It funnels poor people into low paying jobs, and those who are better off into higher paying jobs, as they can afford the risk of taking out the loans (and likely have parents with good credit to back them).

Of course, that's assuming that the cost of lost tuition on cheapo degrees is made up by bumping up the cost of good job degrees. If you merely cut the tuition of some without raising the rest, then you will need to deal with all the school's who have wildly outsized budgets that were being subsidized by the cheapo degrees.

Or, the government will end up paying for it, and there'll be a glut of social worker degrees flipping burgers because social work and library sciences have a relatively fixed number of positions available.

There's a shortage of software engineers and we need more students to enroll in STEM. When deciding between an expensive STEM degree or a free liberal arts degree, students are incentivized to chose the free degree in your proposed solution.

The logic is wrong because you've assumed a negative or zero correlation between societal usefulness and earnings when the correlation is actually a positive one.

Maybe a social work degree has positive externalities that far exceed the earnings. But there's also a lot of crap that doesn't, and incentivizing the landslide of crap and disincentivizing the skills that are in shortage will do a lot of damage.

Stuff that pays well tends to be stuff that's actually valued by society. Structural engineers and surgeons get paid lots of money because they actually value add and their skills are in short supply.

The loan burden is on many people who do not complete their degrees. If a college's options are: enroll people in very low margin degrees, with likely comparable costs, or enroll people in the high margin (& high earning) degrees but with a success rate of ~75% year over year, the school makes way more money but only a third come out with the value add degree. The incentive there is to push people into the alluring high risk high reward field cause they make revenue regardless. Let in more people, allow for bigger class sizes, offer more classes, etc.

The happy path might be the same or better, but the sad path gets grimmer. All that said, the completion rate fiasco is it's whole own can of worms.