I haven't had a new student loan since the 1990's so I may be wrong in assuming that the terms of student loans have not improved, But during the seventeen years between taking my first and last, there was always a 5% origination fee on top of the interest. Those came off the top before the school deducted their cut.

I'll add that as an 18 year old, I had no concept of what borrowing the money...a whopping $1500 which was half of one semester's tuition at a private university...meant. I wasn't sober enough to handle that sort of responsibility for another several years.

The system isn't broken. It's become corrupt. Banning discharge via bankruptcy was sold by saying that doctors and lawyers were the primary source of defaults on student loans. That's not the case today, and the student loan industry is largely built on reselling loans and collections.

The system is designed to leverage massive asymmetry at every point. Even down to, "why aren't you taking out a loan to insure your child receives the education they deserve?"