Student debt is a bubble created by making it non-dischargeable in bankruptcy.
Schools ask for $20k, government lends $20k. Schools ask for $30k, government lends $30k. $40k, $50k, $60k, $250k, why should the schools stop? Zero underwriting, zero incentives to not waste money.
What's all the overhead is for if professors are being paid poorly.
The ironic thing is that the former professor is an ex-CEO who had tens of millions before he ever taught a class.
"For whoever has, to him shall be given..."
It is probably more accurate to say that student loan debt is technically dischargeable in bankruptcy, but it is extraordinarily difficult to do so, since you need to prove undue hardship.
It did happen once in 2020 however, so it may become more common in the future.
Is there any legal mechanism to do something like this?
Maybe if the student signs a contract allowing the University to do so.
However, that scenario you are describing is unlikely to last beyond those people who were given the loans before student loans became dischargeable. Lenders would simply become extremely picky when giving out student loans, in the scenario where student loans are dischargeable.
Probably something along the lines of "oh, so your degree is not in CS/engineering/pre-med/<other-high-earning-potential-degree>? And you aren't taking the loan out to attend Stanford/UC/<random-Ivy-school>? And you don't have much in terms of collateral assets to be discharged in case of a bankruptcy either? Well, we cannot offer a loan, sorry". Which would essentially make student loans not an option for vast majority of students.
However, I followed the logical chain of thought of where that approach would lead. And I honestly don't want to live in a world where we reserve liberal arts and other non-STEM degree just for children of the wealthy, while the rest have to settle for "useful degrees". And I am saying that as someone who went to a college where almost everyone was doing STEM (which makes sense, given it was an engineering school).