[roosterdawn]

The problem I have with your argument is that depending on one's viewpoint, this could be a feature and not a bug. Historically, humans have had some conception of reasonable ranges of rates to charge for interest and purchases to underwrite that fall inside the bounds of ethicality, and things outside of that boundary that were deemed unethical and usurious or outright slavery.

Let's take your example of student loans. We can both agree that making student loans dischargeable in bankruptcy and not owed to the government would cause the student loan market to contract. What if you think that this kind of debt, being non-asset backed, is not just unethical but unsustainable inside a functioning free market? What if you think that many institutions have made use of debt inflation to bloat their bureaucracies, facilities and other non-academic investments via a bubble that can and should pop? What if an alternative financial product should exist that forced institutions to put skin in the game towards the permanent economic future of the students that they are ostensibly responsible for and selling a product towards advancing?

I think that we need to remember that debt is primarily a mechanism for moving around value, and that the intrinsic value (liquidity) that it provides is distinctly marginal. We as a society in America should question whether it is a robust long term strategy for the country's economic future to even allow for the option of selling an education with debt-based financing without some kind of a positive outcome guarantee. Otherwise, the incentives are almost guaranteed to result in bad actors exploiting the disenfranchised. Outside of the moral hazard here, the more unavoidable hazard is the market hazard of overleveraging assets whose intrinsic value cannot support the bonds they back, causing an unnecessary macroeconomic financial shock that could be avoided with foresight.