That's the question Duke Cheston asks in today's Pope Center piece. That is, what if colleges had to pay the federal government if students they "educated" with federal loans later default? Duke looks at the arguments pro and con.
This is a second-best solution. The federal government should get out of financing education entirely, but until that time, this change would have salutary effects. College officials would no longer just concern themselves with maximizing the flow of students through, which is now the way to maximize revenues. Instead, they would have to consider both the quality of the student and the usefulness of their courses.