Depends on what you mean by "dangerous". Hopefully the student records would have more detail than "this student is dangerous"..
To my mind, inconsistancy can be the most dangerous, eg we had a charming retired gent who came to us to fulfill a lifetime's dream... Sometimes he would do three perfect circuits, then the next just point the aircraft at the ground and shut his eyes...
sending him solo would have been like playing russian roulette! If someone is consistantly shocking at circuits it's a bit easier to break the news...but as for the morals, if they insist on carrying on after being told that there is litle chance of them ever flying solo, well that is up to them. But it would be wrong to just go on and on without discussing it with them.