Earlier quoted context omitted.
The rationale is that you can't take away an education the way you can repo a house or car. That and something about doctors borrowing a couple hundred K, then declaring bankruptcy to discharge it after graduation.
And yet, nothing prevents me from maxing out my credit cards, and spending it all on whiskey and limousine rides... Or totaling my car (While only having liability insurance). Lenders charge a premium over the prime interest rate because of the risk that they will never get their money back. Student loans are backed by the federal government - there is zero risk for these lenders. They seem to be under the impression…
I upvoted you because I think you've put your finger on something, and I think part of the answer is a collective unspoken belief that people who may not be meritorious on past academic achievement and/or very low on the income spectrum should have an avenue to determine their own educational destiny through hard work if they pledge a return on the investment to help them get there. And because of an impression that the rates would be too prohibitive if left to market forces, there's a risk trade-off to keep them artificially low enough for more people to pay them back on schedule at the expense of the taxpayer. I'm not saying this is a good thing, but we the taxpayers take a haircut when these loans go into default and have to be sold off at a discount - I don't think it's right to say the student bears all of the risk. The lender plays both sides.