I think there's too much moral hazard there. A young person, with no real assets (you can't repossess a degree) would probably decide bankruptcy is a relatively good option, immediately after they graduate. And so the interest rates spike to cover the risk, which makes bankruptcy an ever better option.

This is one of things, like corporations being able to sue governments, that sounds horrific but has relatively clear benefits because if the risk is too high the business deal won't happen. A classic prisoner's dilemma, and the answer to that is always to change the rules of the game to try to make cooperation pay for both parties.

Not that both systems couldn't be improved.