First the government loses the personal information of half a million people. Then they effectively give up on trying to reclaim half a billion dollars in student loans. Awesome.
If education is such a great investment, why aren't hedge fund managers recruiting the best and brightest high schoolers to have their university studies paid in full in exchange for a percentage of future earnings? I didn't go to Columbia because York was 1/8th the cost, and I think I've done fairly well with that liberal arts degree. Where would I be right now if I had an Ivy League diploma and the connections that come with it?
Had I been approached at age 17 and told I'd have a free ride through university and a stipend for spending money in exchange for 15% of my earnings for the 15 years after I graduated, whatever those earnings were? Put a floor on the amount I'd need to clear before it kicks in, maybe $20k, so I have enough to live on? That sounds like a far more compelling deal than having a large debt load hanging over my head. Get a bunch of kids who scored great on tests and pass an interview to determine their motivation, aptitude, and ambition... people good enough to get small grants/scholarships but not a free ride. Offer it to them. And when a bunch of them accept, bundle it into a fund and sell it. Different funds would cater to different students and different schools, some might be very major-specific, others could be more diversified. Top schools pay for themselves an average of 10 times over the course of a career. This strikes me as a far better bet than mortgage-backed securities if the terms and financing were framed competitively, which would happen over time given market forces.
Most positively, this approach would effectively remove a major source of stress to students, freeing up their focus to put it into their work and studies. Fund managers would have a vested interest in ensuring their students graduated and succeeded - higher management fees might go to coaching or mentorship. Lower-fee funds might skip that altogether.
This all operates on the assumption that the purpose of post-secondary education is to get a job that pays more money than you would earn going the University route. I'm not suggesting that's a healthy belief, nor am I suggesting that it's the sole reason people go. But I do believe that it's the driving motivator for a lot of students and their parents, and I think this would make a hell of an experiment.