[bobbydavid]

It's no problem for the bank of they can't accurately measure your risk of defaulting, as long as they can assess a group risk. So, say 4% of students fail to repay, the bank would use that number.

Just like car insurance when you first start driving. They don't know (or care) if you're a good driver so they just average beginner drivers and base the price around that average.

[enraged_camel]

Well, the average might be based on group risk. But car insurance companies still care about your individual situation as well as driving history.