Removing default risk from loans provided to young people for education is so perverse it almost goes beyond words. Re-introducing the ability to default would

Removing default risk from loans provided to young people for education is so perverse it almost goes beyond words. Re-introducing the ability to default would actually set a fair price on these loans -- interest rates would skyrocket, tuition prices would go down, or students would shift towards cheaper universities. If doing so results in massive outflows of tuition from universities for relatively worthless degress, and a large number of students deciding to forgo college altogether, that is what you call a "market correction" and would be extremely healthy. The reason we are in this mess is because the loans are not priced properly because, other than the debtor dying or being unable to provide a steady income stream, or the government deciding to reverse policy, there is zero default risk. These loans are already yielding 8% in a market that has a risk free rate of about 3% over 30yr, and these loans cannot be defaulted on without a change in government policy! This should tell you just how fucked things are -- if students seeking degrees that will earn $20-30k/yr could default on these loans they would probably have a 20-30% interest rate (if not higher) or probably just wouldn't even be offered, since the default rate would be hilariously high, so the higher education market would be forced to correct. Loans should not be a de-facto life-long indentured servitude to a lender. It's an abject moral failure of our society that this has been allowed to go on as long as it has. The day of reckoning will come eventually, maybe in a year, maybe in a decade, but when it does it's going to leave a gigantic crater in the interest rate markets. This does not mean I am sympathizing with the people who have made poor financial decisions. Once corrected, these individuals should be free to declare bankruptcy and default on these debts, like any other, and pay the price for their actions in being unable to secure further lines of credit, potentially for the rest of their lives. This has real consequences: no credit cards, no car loans, no mortgage on a new house. This is the price we all agree to pay in the case of being unable to pay our debts: we cannot borrow money for many years if ever again. However, except for these poor souls, borrowers do not agree to being lifelong slaves if they make one poor financial decision or fall upon hardship that prevents repayment. The loans are mispriced, and the lenders should have had higher interest rates on them knowing the risk of default was extremely high on a liberal arts major going to school for $50k/year. I am simply recognizing the fact that in this sector, the market has been distorted and is deeply corrupted by the removal of a fair market for student debt. These banks deserve to be wiped out on these loans.