The problem is that these students are ab initio and being new to aviation are 'soft targets'.
Perhaps I've got the wrong end of the stick, but are you saying that because we know the risks of up-front payments, nothing should be done to protect those who don't?
No; I am just saying that nothing (I can think of) can be done.
The school offers discounts because - usually due to poor financing - they need the money paid up front.
If they were banned from using the money, they would not offer discounts, and then only a complete mug would pay up front, but also the FTO business would collapse because most of them would run out of cash.
I agree the ab initio airline pilot wannabees are soft targets. When I started my PPL I knew absolutely zilch too. But 99% of them won't read pprune before they start, and anyway greed always works so a 10% discount will draw the cash in no matter how dodgy the business reportedly is. My sister, who is not particularly dim, lost most of her savings to a ponzi scammer who offered 8% interest per month....