Since there is pretty much no social safety net, people are probably going to find some sort of work even if they have a lot of student loan debt. And, the debt servicer can garnish those wages. You are essentially selling yourself into slavery if you take a student loan! (And the reasoning is so weird to me; I went to a state school and tuition was $750/semester. Why are people paying more unless they are extremely gifted and they want to go into a highly regulated field like civil engineering or medicine?)
Student loans not being dischargeable through bankruptcy creates a moral hazard, much like bailing out banks. Banks will lend an infinite amount of money for student loans, because there is no risk to them. Creating free money always devalues it; if you have to work for your money, an education is priced $X because that's the maximum people will pay. If everyone gets unearned money to pay for education, it becomes worth $X + $Y. This is just the SaaS model for people. (Consider AWS; "oh you want to make money selling a SaaS service? we'll take 10% of your revenue for servers." Student loans are the same thing, "oh, you want to go into a high-earning field? we'll take 30% of your income for the next 10 years.")
Compare this to things where banks could lose money, like mortgages. If you bid $1,000,000 on a property that's worth $200,000, the bank will simply require a down payment of $840,000. They have no interest in your starry-eyed games. If you walk away, they can close out your loan by selling the property at the appraised value, and they're happy. Banks have the right amount of paranoia about lending for this kind of purchase; their goal is to never lose money. Student loans should be no different; current grades and expected job prospects should play heavily into the decision as to whether or not to lend money. This will reduce the cost of education because selling a $600,000 art history degree to straight-C students won't be viable in the market anymore. (Universities will fight hard against this, because the degrees are cheap and everyone pretends they have some value. If people realize degrees don't have much value, the cash cow dries up. But we have to kind of look at the effect on society as a whole and realize that work experience is actually what we value. After the first 4 years of your career, nobody cares about your GPA or where you went to school anymore. And incidentally, 4 years is exactly how long college takes!)
You're entirely right, but if I have $200K in debt for my useless undergrad degree, and I can only find a job at Starbucks, garnishment or not the bank is not getting their money back. The court will order some kind of payment, sure, but they'll prioritize me paying for rent and food.
I agree with that. Having that money taken out of your paycheck just makes you extra miserable; you're in debt, you get yelled at for not making Karen's coffee right for 8 hours in a row, and you don't even have enough spending money to go see a movie or whatever. It's just miserable and I don't like it; if you have to take a shitty job to feed yourself, you shouldn't have to live a completely miserable life 24/7. That just doesn't seem right to me.
Hopefully for you the court's prioritizing will actually allow enough $$$ for your rent and food and medical expenses and transportation and clothing and etc. And adjust that when inflation hits the costs of those things.
As I have written in another comment. This scheme only works if the college is owned by the bank and the college is spending a tiny fraction of the tuition on the student.
