yes, this dynamic is by now a well-known moral hazard, and yet we still have this system. why? one reason is because it's advantageous to capital holders, who a

yes, this dynamic is by now a well-known moral hazard, and yet we still have this system. why? one reason is because it's advantageous to capital holders, who are more effective at attracting and aggregating that risk-free money (the fairness rebuttal, that non-dischargeability reins in fraud, is a non-sequiter obscuring the main underlying issue). people rightly correlated education with social and financial success, but wrongly inferred a causal relationship between the two. universities were more a way for the wealthy to identify and promote each other, rather than bestowers of magical money-making skills to all (although it can do that too, but that's not the majority or primary outcome). so politicians, in an effort to level the playing field, saw that loans were one (minor?) impediment to higher education. in the rush to address that issue (and earn kudos, jobs, money, or whatever), those politicians ignored (possibly willfully) the real, and much harder, barriers to upward mobility. they wanted a clear win, and government-guaranteed loans were it. and this (simplified) narrative leaves out many other proximal complications. it's very hard to identify the root cause(s) of systemic problems, much less fix them. most people are not incentivized, nor have the patience, to do so. politicians were trying to provide upward mobility, but rather solved a financing problem instead. (n.b. - i benefitted from government-guaranteed loans to attend a good university that otherwise would have been out of my reach)