[thatcat]

The money can't be spent on a house or any useful asset that could be resold. They wouldn't give you a loan for that at 18 because it'd be irresponsible since they know you don't know anything about finance or economics as you likely don't have an education yet. They'll give you a high interest credit card with a 500 dollar limit to buy what you want though.

[AnthonyMouse]

They give you the loan because the asset is you. In general if you get a degree, your future earnings increase by more than the cost of the degree.

The "problem" is that if you don't pay a mortgage the bank takes the house, but the only thing for them to take if you don't pay your student loans is your future earnings, which is just the thing where you have to pay back the loan.

[thatcat]

A educational program using "your future earnings" as collateral only really has a claim to some percentage of the delta between what you earn and what you would earn without the degree (after 4 years experience), which would incentivize them to not to structure programs in a wasteful manner or misrepresent the future economic value of a given program.

In many cases, that delta is negative. The school and lender should at least be forced to disclose that reality when you're filing FAFSA and taking secured loans.