We have bankruptcy (in Australia)- it is based on the Jubilee concept. Here your debts are forgiven after 3 years if you go bankrupt (used to be 7) but don’t expect anyone to jump at giving you another loan in a hurry. Why should they? Trouble is people want there debt forgiven and still live the high flyin lifestyle that their study bought them. The Jubilee concept was a do-over thing and was for people who were flat out poor and unable to pay their debt.
I am unsure how your system is financed but our student loans are paid back through the tax system - once you have completed your study and earn over a certain amount the tax man cometh and taketh a percentage. There is no interest charged as far as I know. It seems to work ok.
Mel
When I went to school in the US (a while ago now), we just paid the loan off in installments just like any loan. Most of the loans were from private lenders. Recently, early in the Obama administration, the federal government basically took over the student loan industry.
This was a perfectly workable system for a very long time, but a lot of rot and corruption came into the education system over the years, and recent attempts to fix it just makes it worse. They have been playing the game of raising their tuition at a much higher rate than inflation for at least two decades now, but they always cry poverty, so the states and federal governments step in with even more money.
The students are the genuine victims, but bailing them out also bails out the people that caused this mess. The education industry is trying to keep the bailouts coming, but without admitting they are the cause of the problems or undertaking any real reform.
What's wrong with pay as you go? I worked nights and went to school days. My company was nice enough to help with tuition as long as I maintained a certain GPA. It took me a little longer, but I graduated debt free.