Universities certainly have the incentive to take money when people are lining up to give it to them. I don't blame people for doing their job to grow their institutions.
You'd think students would be incentivized enough not to dig themselves into thousands of dollars in debt, but students are also incentivized by the wishes of their parents and the promises of a good future. Incentives don't have to be in someone's best interest to be motivating.
The real problem is the guaranteed federally-backed loans that aren't dischargeable. Remove that and the tuition fees and attendance will come back down to earth.
I doubt that reducing the consequences to borrowing will lead to less borrowing. The opposite would happen.
Universities don't care if you default on your loans, they've already been paid.
If they're dischargeable, rates will just go up, or the government will have to subsidize them further. 17 year old kids aren't choosing whether to go to college based on whether the rate they get on their loan swings a few points in either direction.
The bad public policy in this case is a symptom of cultural expectations, not the other way around.
If a politician runs a campaign on “reducing student loan assistance” they will have committed political suicide and it won’t change the minds of any mother pushing their 17 year old son to go to college.
You'd think students would be incentivized enough not to dig themselves into thousands of dollars in debt, but students are also incentivized by the wishes of their parents and the promises of a good future. Incentives don't have to be in someone's best interest to be motivating.