A fully private market would be very small, because student loans don't work well with bankruptcy protection. Every MBA and lawyer in the world would just get their degree and then declare bankruptcy.

You're also confusing various kinds of ROI here. Education generates both individual and societal ROI. Governments can capture part of theindividual ROI through taxation. And the whole point of government is to create societal ROI. But what a fully privatized educational funding system would be optimized for is lender ROI. As we see with student loans, and even more clearly with loan sharks, who are the true unregulated lenders, maximizing lender ROI is not great for the health of either the loan recipient or society at large.