I think the first part is already true? "underwrite" was probably the wrong word to use in my original post. the federal government doesn't really underwrite loans anymore; it directly issues them. the federal loan options all have yearly limits already. if I understand correctly, the remaining private loans are actually not underwritten by the federal government.

but anyways, I don't really see the point in having the federal government issue loans knowing it will end up forgiving a large chunk of them. why not just package that money as grants to the neediest students instead?