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The way to fix it is for the federal government to get out of the Federal Loan guarantee in business and turn those over to the private sector. And make them dischargeable in a bankruptcy. Then free market lenders would only give loans to people who had a reasonable chance to pay them back with the degree they were getting, and universities would need to lower prices to attract students willing to take on those loans.

Lots of truth in your statements.

There are two successful alternative models in effect right now (not counting the unusal universities where tuition is free or given in exchange for hard work, military obligation, etc.):

Hillsdale College model (copied by a few others): No federal student loans allowed. Hillsdale has their own group of lenders who make loans at reasonable rates because Hillsdale graduates are employable and at low risk for default.
North Dakota model: North Dakota has a state owned bank which makes affordable loans for all state institutions of higher learning. They keep tuition rates reasonable and limit the amount of the loan based on field of study, academic progress and marketability of degree. Professional students (and fluff course majors) simply find themselves unable to borrow more at some point. Accordingly, the state's exposure to default debt is very limited and nearly all loans extended are paid off. Degrees are mostly marketable because few fluff degrees are offered. Tuition is reasonable, so no high amount of debt is possible for the reasons noted. All in all, a winning combination even with a state government involved because said state government is fiscally conservative.