I see your point about Freddie and Fanny, government backing allows people to go to college. Of course this leaves a lull in the service industry, because those that went to college cant afford to work for minimum wage while paying off college loans.
The more salient point that most people miss is that pumping money into the college industry has directly lead to tuition inflation. Thus making student loan debts all the much worse.
This is a recurring theme in government programs. Efforts to make something more affordable just make it more expensive -- kind of like targeted inflation. It can take the form of free loans or grants or tax credits or rule changes... there are lots of ways to screw things up while meaning well.
What we need is some sort of death penalty for government programs or institutions. They should "go out of business" if they screw up too badly. Alas, we seem to be heading in the opposite direction where now certain large corporations aren't allowed to fail.