2. An economy where a major portion of debtors are unable to discharge their loans (due to the laws presuming student loans as ineligible for discharge), debtors will fall into a cycle of inability to pay debt, inability to qualify for a home, apartment or a vehicle, and potential inability to qualify for a job (credit check) and become increasingly dependent on government programs to stay afloat. This can put a strain on government resources beyond what a simple bankruptcy would do, which is the forced cancellation (discharge) of a debt. Basically, the cost of a bankruptcy (to the economy) is smaller than the cost of an otherwise capable judgment-debtor on welfare/Medicade/SNAP/others.
3. Private student loans, which are effectively no different than unsecured debt, should be presumed dischargeable in bankruptcy. Federal student loans are actually structured quite nicely, except many debtors do not understand the complexities of the multiple forms of loans they carry (perkins, plus, university-managed, subsidized, unsubsidized, private) and rules for one loan type do not necessarily apply to the other.
Colleges would actually benefit from student loan reform, since they could better educate students and parents on standardized loan packages, rather than the large array of loan options available now.
But more directly these people and institutions made a bet, the fact not all bets win is a basic fact of life.
PS: I have negligible student debt at sub inflation interest rates remaining. But, for people with 8+% interest rate loans that interest should very much should be on the table at a minimum.
2/ Objectively, what is the likelihood that continuing the status quo crashes the system?
3/ What are the long term consequences from potential solutions? E.g., if current debts are forgiven/cancelled, would lenders refuse to lend for colleges? Would well off people with significant debt take advantage of the system we're protecting, leading to less trust in it, which could cause it's own collapse movement?
The defensible logic is that we don't really know that current student debt will "crash the system", and we definitely don't know what the 2nd and 3rd order consequences would be if any of the solutions were implemented.