I'd like to point out that if the government were held to breaking even on its student loans, or even just to any standard at all, some point below break-even, the interest rate would have default risk priced in. Unfortunately this would also expose it to charges of racism, sexism, etc. from the left.
The authors of this paper seem to prefer that the government view itself not as a lender, but as a "diversified investor in the US labor force," that implements a more complex model than they're willing to describe.
Bottom line is that the supply side has gotten all out of whack from the demand side. It has to be put back in balance one way or another.