I never thought the government should be financing college anyway. If banks are that stupid, that's their problem. Maybe the colleges should be financing it themselves, like Yale with their 40 million dollar endowment fund.
I tend to agree with this approach, it accomplishes three things:
1) Shifts some of the "risk" to the university/school, so the university/school has an incentive to help their grads get their foot in the door, currently most schools have NO incentive like that and are in a "risk free" position with all that government-guaranteed money. The average college these days views new students as "free government money" and doesn't really care whether they even find gainful employment.
2) Would DRASTICALLY cut-down on the number of "fluff" and "worthless" degrees such as Liberal Arts and Women's Studies. Would simultaneously promote actual "marketable" or in-demand degree programs. If the college has it's own money at stake, it's not going to be offering so many useless degree programs, simple as that.
3) No more enrollment of "anyone with a pulse" due to government-guaranteed loans. With it's own money at stake, the college would HAVE to be more selective of which students it takes in by default. Taking in low-IQs and random people off the street would suddenly be risky for the college from a financial standpoint. Currently enrolling "anyone off the street" is very profitable for colleges due to student loans.