is it possible to have Electrum returned change back to the paper wallet?
Paper wallet has only one address. If you have spend the coins and you do not spend all at once, the change will be sent to the address that you are spending from.
I heard that this is not a good idea when it comes to privacy
Yes. If you want a change address, you can create another paper wallet using an airgapped device and spend all the coins by sending the remaining coin (change) to the paper wallet address that you have just created. Let it be be in the same transaction with the coins that you want to spend. It is still 1 input and 2 outputs.