What's the waste?
The school still got their money for tuition. It is his problem now if he can't pay back the loans. He worked on plenty of patients while there and the school likely got paid too.
The assumption of getting nothing via alumni donation is a bit sketchy. There's no guarantee that any student will give money.
On issue of who pays for background checks. I think the school can easily afford to pay and possibly profit from liars. Just obtain one for those who already sent in their deposit. With a dozen or so forms to sign, I'm sure they can at least add in one that has you swear you've disclosed everything. If something comes up that is not disclosed and is glaring, you forfeit both your deposit and seat.
Deposits are about $1000 or so. Fork over $150, if you catch a liar, profit $750 in less a minute. (granted I'm not factoring in the cost putting aside time to interview) Only other fast money maker for them I can think of is collect application fee, then few clicks to sort via gpa/dat score and reject everyone below cut off without ever reading their app. Email rejections to save on stamp, letterhead and ink. I'm sure someone has already created such a program.