If it's a bad bet for the bank, that just means it is a bad bet on average and right now. The thing is, a student can know a lot more about themselves than the

If it's a bad bet for the bank, that just means it is a bad bet on average and right now. The thing is, a student can know a lot more about themselves than the bank can. A student can make a bet with an extremely high expected return, that the bank would be unable to appropriately risk-price. The problem with the current system, is we don't force the students to understand the price of the risk. The problem with making them normal loans is that the bank is unable to accurately price the risk. There are middle grounds, but arguments from the extremes seem to carry better.