These people clearly can’t afford the loans they are taking out. If these were PLUS loans and they had to reapply every year, it is likely they’d still qualify as debt ration is not a consideration.
If they had a PLUS loan, they could ask to defer the payments until after graduation and not even realize what the monthly payments (for the first child ) would be. If the first was still in school when the second states, they’d qualify for those loans too. As long as they aren’t in default, they can keep borrowing, keep deferring!
If this is a new ‘type’ of loan, it doesn’t sound that different than a Plus loan except they don’t have to requalify (which isn’t hard to do) every year, and they are required to pay the interest as it accrues rather than ask for a deferral.