For colleges that's pretty cool. Now, they can increase the tuition, knowing that a student is liable for any loans for the rest of their life. Cool huh?
College tuition would radically drop if their was no Gov't grants, loans, etc. But, if a college knows they will eventually get paid they have no incentive to lower prices.
And if you went bankrupt, then someone still had to cover the costs. Life is not a game of Monopoly.
As to college tuition, you are drastically oversimplifying things. College is not expensive simply because there’s lots of financial aid available. Salaries, facility costs, administration, regulations, etc all drive tuition up as well.