The major problem with student loans is that there is no longer any escape from them. Bankruptcy does not discharge them. You're stuck with them for life.
That is a major departure from traditional debt laws, and this is just wrong. People should be able to escape their mistakes after appropriate penalties.
A student, 18 years in age, cannot comprehend the gravity of the loans they are taking out. The whole situation is rotten: you are told that you MUST get a college degree, otherwise you will be a lifelong failure. You are told that IF you get a college degree, your future WILL be rosy and bright. You are told that ONCE you get a college degree, you WILL get a good job and then paying the loan off will be no problem.
That is the extent of your knowledge when you are 18. You have no idea how much your salary will be in four years, in fact, when you are 18, it is very likely you don't even know how much your parents make, or how much anyone makes beyond your knowledge of minimum wage. All you know is that you have to go to college and get that degree so you can get a good job. At least that is what my parents told me, and when I was in college, that is the same set of assumptions that everyone was operating under.
And once you get that degree and you can't get a job in your chosen field of study, or maybe you don't even get that degree (because a lot of people don't make it through college - many college programs, particularly engineering, are actually DESIGNED to weed people out), then you are sitting there with a stack of loans and no way to reasonably pay them off.
Prior to 2001, you could try to pay them for a while, but after finding that you were getting deeper and deeper in debt, you could take a deep breath, assess your situation, and then take your lumps in the form of bankruptcy - knowing that you would have a finite period of time in which you would be penalized by a bad credit rating. But at some point it would be over.
In 2001, congress changed the law to eliminate the discharge of student loans from bankruptcy. Any other financial failure is redeemable, but a decision that you made when you are 18 years old, a failure that is not easily foreseeable (because people don't know their capacity, people don't know their future earning potential, people don't know what the job market is going to do), is not forgivable. Never, until the day you die, and even then, your estate will be on the hook for them.
And the loan companies are given extraordinary power, backed by the government, to collect their debts. Hey, if someone owes me money, I can't attach someone's tax returns - but student loan companies can do this. It is also very hard for me to garnish someone's wages to collect a debt because there is always the threat that the person will file bankruptcy. The lack of that threat here gives student loans extraordinary power.
That is the problem here, and it will take people like Lee Siegel, doing what he did, to bring this to the forefront of discussion. Certainly any abuse of the student loan process should be curbed, but an iron shackle on everyone is not the right response to any potential abuse.