Maybe I just don't understand the drawbacks, but why wouldn't a student then immediately declare bankruptcy after college? They likely have no assets, etc.
But if they had more than (say) $20,000 in debt, that is exactly what they would do.
Therefore, no school would let a student get significantly in debt.
Therefore, the school would have to lower prices.
The fear back in the day was that, without some way of holding students to loans, that the students wouldn't be able to get credit, and college would become a rich person's paradise.
I can understand where they were coming from when they were thinking that, but what we've actually gotten seems a much worse disaster than the one they were trying to avoid.