Good credit risks how, if you don't mind me asking? Many are fairly young (straight of undergrad or having a couple years of poorly paid research experience) and thus don't have substantial assets or long credit histories. Plus, they're going into a fairly low paying profession --the banks can't count on a a high salary like they can for, say, physicians and dentists.
I'm not a loan underwriter, but think about it this way - you have a student that has been accepted to an extremely competitive, likely very high-quality doctoral program in clinical psychology (of which funded programs tend to be - highly competitive and compared to the average FSPS program, of top quality), and even better, they have gotten 80-90 percent of their costs already covered. Compared to a student taking out 20-30 times as much to attend a program that has a much poorer reputation, a student of a funded program is a far better credit risk, it would seem to me.
Besides, there already are private loans out there. Granted, currently their rates tend to be worse than the federal loans and have other downsides, but I'm also trying to encourage people to imagine a thought experiment where the federal 'subprime' loan system didn't exist (and also, where people had the same rights to bankruptcy protection that they do with all other consumer loans, which students don't have either). Tuition costs would be lower across the board at all institutions of higher learning, the student loan market would more than likely be far more competitive (absent the effective near-monopoly of the Federal Government over loans) and would be much more fair with bankruptcy protections in place.
Regardless, I agree in that I don't think federal student loans are going anywhere soon. Pulling them would definitely have huge and far-reaching consequences for schools, students, banks, and parents, and would likely be unpopular with a large segment of voters.
Phasing out the Federal Student Loan programs (as Ron Paul has suggested) would probably result in a recession in the higher education market which would most sharply effect the marginal players like the Apollo Group, University of Phoenix, Alliant, Argosy, etc. (which I'm sure everyone here would almost universally agree would be a good thing) - but would certainly affect all institutions significantly. It would probably result in tuition going down over time, and even top universities needing to cut costs significantly. College towns would probably suffer an economic downturn, which is a shame, but is the unavoidable consequence of an economic bubble bursting (and the student loan bubble will be burst, that is for sure).
Particularly if restoration of bankruptcy protections for student loan borrowers could take place at the same time, prospective students would potentially benefit greatly as federal loan programs were phased out - we might be able to return to the days where a middle-class family could provide substantial assistance to their children to attend a university, or tuition could be significantly paid for at graduate programs via a part time job (my 78 year old uncle paid for his law school tuition at Boalt Hall via a part time job aeons ago - unthinkable today). Access to higher education might actually improve over time, and the market would become far more competitive and overall quality of offerings would increase. This really would, on net, benefit everyone IMHO.
More specifically to clinical psychology, the constant, federally-subsidized cash infusions to outfits like Alliant and Argosy would cease and this would actually, forseeably begin to address the APA problem.
I see APA in a serious downward spiral. The Vail model of training was set up, I believe, with good intentions and some serious thought, and I think absent the distortionary effects of the (as I call it) 'subprime' federal student loan system, it would make complete sense in the evolution of clinical psychology as a discipline, but right now the professional clinical psychology degree seems like it's the source of clinical psychology's collective misery (I don't think it is - APA is not the proximal cause and professional psychology degree programs and FSPS aren't the proximal cause, it's like blaming banks or borrowers for the sub-prime bubble, it's missing the forest for the proverbial trees)
The fact is the APA is caught between a rock and a hard place. They have been losing membership progressively over the years (from what I recall), and they've been needing to replace the membership monies lost somehow, so they turn to FSPS outfits for support (like Alliant or whoever it was that sponsored their last convention a year ago). APA also sees FSPS as their only hope for replacing lost membership (as FSPS are notorious for churning out hordes of new clinical psychologists year after year). The problem is this is a terrible recipe for maintaining loyalty to an organization which is ostensibly supposed to be providing some measure of professional guild protection. The cure is worse than the disease - as APA turns off more and more members, with their watering down of standards that results from their incestuous relationship with FSPS, the APA is forced to get even closer to these schools in order to keep themselves afloat, which further waters down standards and their integrity as an organization. At least, this is what I see is going on.
But yes, phasing out student loan programs would be politically unpopular. Unfortunately, so many good ideas are politically unpopular, and so many bad ideas are wildly popular. Democracy is a pretty crappy political system, when you come right down to it.