The loans are given pretty much at the fixed interest rates. So the real price you pay on the loans is quite high over the period of the loans.
Many small businesses and students take loans from banks. Though every business has different needs and different credit history of the borrowers, the interest rates are fixed over the period of the loan.
Then the recession comes, the loans cannot be repaid and the layoffs happen. It starts a downward spiral from thereon.
If we can adjust the interest rates of the loans at any time of the loan period then it should work. Let’s say during a high profit era of the business or the student, lower the interest rates and increase the repayment of the principal amount. While during the not so profitable era of the business or the student, increase the interest rate but recover only the interest amount.
Whether in terms of interest or in terms of the principal, either way you recover at least the principal. Which is the goal of the Governments anyway.
For example you take a loan of 200k for education, while you only need 100k. The interest rate when having a job is 3%, so you make 30k payments per year at 3%. Of which 24k goes to principal. While not having a job, you pay 12k a year, of which 12k goes to the interest at 6%.
But remember you have at least 100k extra to play with here plus your credit rating is not going to be affected. So you can even buy a house with another loan. And there should not be any recession.