The current situation of student loans is a racket, and for-profit universities like Corinthian exist specifically to fleece the government. Destroying the lives of their students is a byproduct.
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)
The only way to have institutions underwrite a loan for a degree that has limited economic value is to make the debt nondischargeable.
So, you either have nondischargeable loans for these types of degrees, else you start having the difficult conversation that maybe everyone doesn't actually need to go to college.
Obviously, one of those arguments plays well.
I don't believe declaring bankruptcy on graduation day was ever a standard practice, nor do I see why reversing the discharge exception would change that.
By and large, people intend to repay debts they incur, and they don't want to deal with the 7 to 10 years (not sure of exact duration) of bad credit that results from bankruptcy if they can avoid it.
Having difficulty buying or leasing a home or car without paying the total cost up front, inability to get those jobs where a credit check is involved, etc... that will never be standard practice by choice.
I'm not sure how bankruptcy works in USA but I doubt it is instantaneous. In Germany you have to liquidate your assets and your income is taken (often everything above minimum wage) to repay your debt and only after 6 years have passed is your debt fully discharged if you cannot cover the whole debt within those 6 years. This means that if your goal is to pay less back than you owe you will have to earn below minimum wage which is far more damaging to your career and well being than just paying the debt without bankruptcy.
Even if for some unbelievable reason degrees are now worthless and only give you access to below minimum wage jobs then the demand for them will shrink and therefore the cost per degree will also go down until it is possible to pay them via minimum wage jobs.
Different degrees have different rates of ROI. When people declare bankruptcy banks have to increase the interest to cover the loss from bankruptcies. If engineering students have a lower rate of bankruptcies because they earn a lot of money then they will pay less interest on their loans which reduces their debt burden and encourages more people to study this degree. On the other hand if a degree has a 30% bankruptcy rate then the interest will rise which increases the debt burden and discourages people to choose that degree.
This is exactly the type of situation that calls for a free market solution.
The root cause of the entire problem is outrageously large loans, provided by the government, that can never be discharged. Until we solve this problem, tuition rates will continue to rise inline with the maximum the government will allow.
And given without any regard for the value of the investment. We don't allow banks to lend people $200,000 to buy a house we know is only worth $20,000 so why is it okay for Sallie Mae* to?
edit: Sallie Mae, not Fannie Mae
Other countries have a more socialized system and still maintain lower costs (same as healthcare). Maybe the problems actually lie elsewhere.
Although for-profit colleges are the most egregious, the absurd rise in tuition across the entire education industry is driven by government-backed loans that cannot be discharged. If we moved the loan system to the private sector, and forced hard decisions to be made about the cost/benefit of education, there would be short-term disruption but longterm stability.
Well yes, when you can legally steal money, it logically follows that it becomes much easier to spend said money.