To be more efficient in federal college loans, we need to tighten up the standards on who actually gets the loans. Those who will gain value from a college education and bring value to society. Those who can't or don't want to do a 4 year college can be encouraged towards tech school (good ones). Yes, we need good electricians, plumbers, welders, etc. Those jobs don't require a college degrees and are extremely useful in both residential and industrial jobs (and expensive due to the lack of supply for them).
TLDR: Stop giving loans to those who come out of college a burden to society.
I agree that we need to tighten up federal aid.
I disagree that we can tell ahead of time of who will be a burden or not.
The real issue is the granting of loans in the first place.
The real issue: As the costs of a degree go up, the size of the loans go up as well. If the maximum size of the loan were to stay down -- or perhaps only go to people getting an education where the costs were limited -- then there would be pressure on the universities to keep the cost down.
In other words:
In a balanced market, if you price your produce -- an education -- too high, fewer people will buy it => you lower your price.
In a distorted market, no matter what price you put on it, someone will fund it's purchase -- and then demand repayment.
To fix the student loan problem, remove the "We'll fund your education at any price", and replace it with "We'll fund your education if it is likely to be repaid".
But that's only part of the answer. The other part is loan insurance.
"We'll fund your education, if it is likely to be repaid, if you agree to pay back the cost, plus a premium for loan insurance, along with the guarantee that if you can't pay it back within N years of graduation, your loan is forgiven". (N should be around 7-10).
In other words, since you know ahead of time that it is impossible to repay every student loan, that you limit the size of the loans, and expect those who succeed will cover the costs of those who fail.
What is the long-term result of that?
1. More people getting loans, and going to school.
2. More people getting degrees, and yet not having the jobs for all of them to get the high-paying jobs that will repay the debts.
3. Partial repayments from most, full repayments from others, and lots of discharged debts
4. As the discharge rate goes up (as fewer graduates, by percentage, can repay), the amount of loan goes down, and the amount of insurance goes up, reducing what can be spent on schools
5. Which in turn forces the cost of education down.
6. Which runs the risk of reducing the quality of education.
7. Which either causes other problems in the future, or forces the education system to fundamentally change.
7 is the fun part. With thousands of schools, and thousands of experiments, someone will succeed. Someone will figure out how to make schooling work better.
And then, either lots and lots of people will copy it, or it will be copyrighted, trademarked, patented, etc, and locked up for just one single group, with extension after extension, until ...
Wait, actually, our current system doesn't sound so bad after all :-)