We really should abandon the Student Loan idea.
1) It is not reasonable to expect people that by definition have NOT had a college education to make good decisions about student loans. Some of their parents may have collage degrees, but not all.
2) They are long term loans that cannot be refinanced. If interest rates rise, the borrowers make out like a bandit. But if they fall, they get screwed.
3) Scholarships are better ideas.
Why scholarships are better:
You can quite easily pick the person who really needs it and/OR the person that most benefits from it.
You can get much stricter on which education institutions qualify for them. This will end a bunch of scams, such as the schools that if graduate from get a $60,000 per year job but cost $900,000 to go to.
You can put in grade requirements for continuing them for next year.
Scholarships fight educational inflation, while loans encourage it. If schools know the main government scholarships only pay Y on average, they will have immense pressure to keep their costs below Y. The government can easily set the values of the scholarships to discourage inflation because they do not want to pay more.
But banks will always be willing to increase the amount they loan to the students. To them, the cost of education is a GOOD thing because larger loans means larger profits.