The relevant function of government is to protect those who have - whether they have a lot or a little, or even only their lives and the rags they are wearing - from those who would unjustly take from them.
Ok. Let’s work with that definition. I’m not saying I fully agree with it, but I’ll work with it since it is yours.
#3 went to school to become a network technician, and racked up a bunch of student debt before the school went broke and it was revealed that what they were teaching varied from never-was-correct to obsolete,
So the school unjustly took what belonged to #3. Specifically, the borrowed money. By your definition, #3 merits protection.
As to why #2 and #1 are paying, they are paying a small part, as are #4 through #335 million, because they would get the same protection if the situation happened to them. The government - which is all of us - has the job of protecting people from those who would unjustly take whatever it is that we have. That’s what you said.
—Peter