It's exactly the same moral hazard as with home loans. There, the bank repossesses and sells the underlying asset so the only time they can ever lose is if housing prices crash.
I'm not not. Something has to change to break the positive feedback loop for loans on limited-supply assets, to restore the concept of ownership.
Destroying 'collateral would be quite drastic. I'm pointing out that it is equivalent to making student loans non-secured, regardless that one arises out of contracts and the other from more recent lobbying.
Simpler would be to eliminate banks conjuring money from thin air, or perhaps to just raise interest rates to the point that essentially interest-only loans once again become untenable.
One example is Germany. I was talking with a German friend of mine at lunch and he noted that they are "tracked" after grade 8. Some go to trade school. Then (IIRC) there are two university tracks - one more prestigious (and more stressful) than the other. The egalitarians in the US would never stand for this.
That said, we cannot continue to fund the system we have which according to R. Arum's Academically Adrift, leaves many students with a mountain of debt and few marketable skills. As the authors of "Paying for the Party" note, these students had a great time but learned little. Both books (and Arum's follow up book tracking graduates) are sobering reads...
Destroying 'collateral would be quite drastic. I'm pointing out that it is equivalent to making student loans non-secured, regardless that one arises out of contracts and the other from more recent lobbying.
Simpler would be to eliminate banks conjuring money from thin air, or perhaps to just raise interest rates to the point that essentially interest-only loans once again become untenable.