Can you explain why that is to me? I would think that if the expected return on college loans drops significantly, fewer large loans would be given out that can be passed on to universities which would see less demand for their product and would need to lower their prices accordingly.
The universities aren't on the hook for student loan defaults so they don't care about the expected return for the borrower or the lender. If students borrowed from the schools directly, then the admissions process along with university spending patterns would be vastly different. The only thing we have that is remotely close to this is schools giving out scholarships to students who have great potential to be high earners who later donate back to the school.
A startup called Lambda started teaching (online) for free in exchange for a percentage of the new graduate's salary. This is called Income Sharing Agreements (ISA).
