Yeah I think the initial motivation behind setting it up this way was good - "let's try to get as many people into college as possible". I'm narrowly making an argument against loans that are not dischargeable by bankruptcy or death.

Changing that in isolation would almost definitely have an effect where low income families can't afford college. I see that as a gap the govt should be filling either through public colleges or directly funding people to go to school, probably both. The core issue I see here is we're letting private companies make bad investments without liability, into something that probably shouldn't be profit-driven to start with