Earlier quoted context omitted.
Student debt is harder to discharge than other debts. You cant even discharge it through bankruptcy. One reason this was done was to reduce interest rates.
> You cant even discharge it through bankruptcy. And why do you think that is? Once you get an "education", you can't exactly have another company repossess that from you. Not being able to remove your student debt by going through bankruptcy is a positive thing .
On the other hand, having our bankruptcy system not apply to a meaningful portion of U.S. lending does create some incentive problems, like the fact that lenders have no incentive to make sure you'll be able to handle repayment, so you can take out huge student loans and find out at the end you have earned a worthless degree and that it will be massively difficult or nearly impossible for you to repay the loan.[1]
[0] For example, https://www.gpo.gov/fdsys/pkg/CHRG-111hhrg52412/html/CHRG-11...:
Currently, a debtor may discharge student loans in bankruptcy only upon establishing that repaying such loans would impose an undue hardship, but this has not always been the case. Prior to 1977, student loans were automatically discharged in bankruptcy.
Perceived abuse of the bankruptcy system, as opposed to any real abuse, drove Congress to change this state of affairs. A 1976 GAO report had found that less than 1 percent of all federally insured and guaranteed educational loans were discharged in bankruptcy. In other words, no abuse.
[1] For example http://law.emory.edu/ebdj/content/volume-32/issue-1/comments...