Non-public prestige schools aren't particularly favorable to transfers generally or CC transfers particularly, finding a community college with programs in a given field that would support transfer to a prestige school is difficult, and CCs aren't really geared to nonlocal students and often the surrounding community is not student supportive the way university towns can be. CCs do save on tuition and registration fees, but often don't save on lab fees, books, and living expenses, and rarely have any significant campus-based aid, which can make them more expensive for some students than “prestige” universities.
While I agree with the parent's general sentiment I also think it's not addressing the initial intent. The reason for the federally backed loans was to give people access to loans that the banks would otherwise deny. The intent is good, but the knock-on effects and perverse incentives that get created are quite bad.
Banks make out well. Higher edu makes out well. Politicians make out well. Students and often their parents lose.
That said, students and parents have alternatives - e.g., two years of community college and then transfer for two more years where a degree would have more prestige - but they too often refuse to do so. Gotta keep up with those Jones.