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.
As for bankruptcy, yes the loss is factored in. And it happens everyday. Bankruptcy is one of the reasons America has a great innovative economy.
God himself approves of debt cancellation. Under Moses, every 50 years, there was a national debt reset, called the Year of Jubilee. No, it should not be taken as an opportunity to avoid responsibility. But the point is that sometimes debt becomes a weapon of enslavement. God in his law is telling us to value freedom at least as much as we value honoring contracts.
Furthermore, if we had such a periodic reset, think how it would curb undue reliance on credit markets. Lenders would have to be planning for the reset by coming up with realistic assessments of creditworthiness and repayment plans that could actually work. It’s all good.