When of course while yes the schools ultimately get the money, it's not a direct handout/appropriation to the school it's a vessel to get the student an education

Since the schools have high demand there is another student that will replace the loan recipient so the private school will not suffer one iota.

However the poor or middle class student just had their bootstraps cut off, the same ones that they'll be told they should've pulled themselves up by in 10-20 years when it's explained to them why they are not to have help with healthcare when they get cancer and have to stop working or why the banks are getting bailed out directly but their mortgage is definitely going to be foreclosed in the next housing crisis

You're not wrong, but I'm wondering how many of those top 50 schools (by wealth) already have guaranteed scholarships/grants that are income based. Stanford, for example, guarantees free tuition (not sure if this covers room & board, or fees) for any students with household income <$250k/yr, which is a pretty darn high threshold. Princeton has been similarly generous for a long time (UVA modeled their program after Princeton's about twenty years ago), and I suspect a number of others have programs like this, too.

Then I would question what the loans are for and why anyone is getting them. If a school is offering free tuition, room, board, books, and fees at best someone needs to buy food. That said without knowing the exact coverage, and situation I don't have an opinion specifically but I would not have a problem setting a rule where loans are not issued until other forms of aid (whether it be scholarships or just free tuition) are tapped and exhausted

However, we've made these loans non-dischargeable and people are basically on the hook to repay them no matter what and if they are going to pay them back they should have pretty broad freedom to use them at the school. If these were grants that didn't get paid back, I'd be a lot more sympathetic to the "well these have to be used at a state school and that's it, sorry, no free ride into the elite class today".

But these aren't bags full of cash that are not traceable, the students are going to pay these back come hell or high water, they should be able to use them where they want (within reason--we shouldn't be issuing loans to people to go to ITT Tech)