The rates charged to students were still very favorable.
“Student loans used to be dischargeable.” Yes, that was almost 40 years ago, and the laws have changed continuously since then.
Prior to 2005, student loans from gov or from a non-profit were not dischargeable. That’s where the lower rates came from [from Congress-a/k/a tax dollars]. Post 2005, loans from for profit entities (a/k/a banks) also were not dischargeable.
But back in the 70s, 80s, and 90s, student loans were dischargeable after a certain period of time (you mentioned 7 years) if they had been in payment during that time. I may have the details wrong, but this case was intended to capture a student who paid for a number of years and then had some unexpected hardship; it was designed to prevent a student from racking up big loans and declaring BK soon after graduation. Of course, remember that these loans were primarilly gov programs (or a non-profit) and that tuition was not outrageously high.
Public school tuition is way too high these days. I have a bunch of kids, and this is something I watch carefully. U. Texas is about 10K a year tuition for an in-state student! 25 years ago it was about 500 per year tuition. Heck, back then one did not need big loans to attend a public university—a part-time job during school and summer jobs could just about cover the entire thing.
In fact, I remember that it used to be rare for anyone to have large student loans, except for those who just graduated from medical school.