The banks actually blew it in 2008. They came crawling to the federal government and asked the Dept of Education to take over all their (federally subsidized, not private) student loans and bail them out. They did so—those loans were called “PUT” loans and were converted to federal loans.
After that, it was easy for Obama to announce the banks couldn’t handle the servicing of student loans anymore and they all became 100% Direct loans. As a bonus, the decision helped “fund” (justify) the enormous costs of Obamacare.
However nefariouslynit was started, it’s money laundering on the backs of students.