That is totally fine. If student loans become hard to get, students and universities will take prudent decisions, which means, there wont be a bubble effect because of super easy / free availability of loans.

Basically, student loans in US is similar to mortgage crisis in 2008.

US will be better off with unemployable people with no degrees and no debt, than unemployable people with a useless degree and debt.

Without a feedback mechanism for universities to feel the effects of the job market on its graduates/alumni, there's no incentive for university to admit students into its "sub prime programs".

Let the government fund those esoteric programs that have no job prospects. That way the spending on those education programs is visible to the tax payer.

"not well off students" can always have the university take a bigger chunk of the responsibility. While ensuring that there is no bias in admissions, universities will have an even bigger incentive to ensure the success of this 'not well off' student. Such success rates can be tied to the Universities' credit rating. Higher the rating, lower %age risk the edu institution needs to take.