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US Government gets paid back also through tax revenues on the salaries of the school, salaries of studends, expenditures of the schools to US based companies, etc.

It might still be favorable for the US Tax Payer even if these loans end up un-paid.

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I don't know what colleges you're looking at, but you're misguided if you think colleges spend 100% of the tuition they receive. Schools like Harvard, Yale, Duke, etc. have multi-billion dollar endowments that just keep growing. Many colleges have so much money coming in and are forced to spend to keep their non-profit status that they build opulent dorm rooms, buildings they don't need, and have more Vice Provosts than banks have Vice Presidents. My own alma mater has TWO art museums on campus!

Most universities I'm familiar with spend 100% of their tuition on operations and some amount over that from endowment income. While they do have endowments, those are restricted and cannot be used for anything except their contractually agreed to purpose (scholarships, faculty lines, research for xyz thing, etc.).

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