Option 3: Make the schools co-obligors on the debt. In a default, the school pays. I suggested that to a congressman once; he nearly spit out his drink.
I was thinking the same thing except maybe place it at 50% or something. So they still want to give out loans but are more judicious about it.
Also there might be scale correlated to market demand. So if doctors are in high demand the gov backs it more, if it’s something with little market demand, back it less.
Easy classes and grading aren't going to help people not default.
The school can really only improve the education they provide or make their admissions more stringent. If they are going to do the latter, we might as well go back to direct government support, no need to have a loans process and all that noise.
Also there might be scale correlated to market demand. So if doctors are in high demand the gov backs it more, if it’s something with little market demand, back it less.