That's how supply and demand works though. When people don't think the ROI is there prices will drop.

Admission to a to school seemed like the only path to wealth when I was growing up. I don't think I can make that same claim for my kids.

For whatever I have saved for them I'll offer to put it towards college or give it to them when they turn 20 to start a business.

The supply/demand equation for college is broken precisely because student loans are can’t be discharged. Every student essentially has an infinitely deep pocket to borrow against so colleges continue to raise prices.

Sure, loans help increase prices just as with cars and housing. But the supply/demand equation is still the same. A high number of high school graduates want those few freshman seats at top colleges and are willing to pay X over the next 10-20 years to attend. College prices will rise until they hit that number. The structure of the loan (interest rate, terms, etc.) is factored into the value of X.

The problem comes when the actual value of graduating from a top college does not equal the expected value. That's where you get people making poor economic decisions (or when they don't read the interest rate on the loan). The people who have to pay $5k/month in student loans, but make $20k/month at their job are getting the deal they expected. But the people who knew they'd have to pay $5k/month but can only find a $8k/month job are having buyers remorse.

You can't compare student loans to car/housing loans. If I only make $50k/yr, there is no bank on the planet that will give me a loan for a $300k ferrari.

If I make a poor economic decisions, and choose to buy a ferrari, I'd also have to a find a bank willing to support my poor economic decisions. Naturally any bank will not take me seriously how much I plead with them on my ability to pay them back. That changes if I the bank is guaranteed by the government to get their money bank.

How much would a Toyota Corolla cost if the government was willing to fully back any car loan? Why wouldn't Toyota charge $500,000 for a Corolla if banks didn't care if their borrowers couldn't pay that amount back?

The short of it is people who would normally be completely priced out of a college education are now enabled by banks who give them fiscally irresponsible loans because they know the government is guaranteed to pay them back, whether or not the borrower can pay or not. If these loans didn't exist, there would be fewer people willing to pay $50k and schools would be forced to lower prices or go defunct.

They are only willing to pay X because X=Y+Z, where Y is what they can afford and Z is the max loan they can get. If they couldn’t get that loan Z, market forces would cause college costs to approach Y.

True, but then only rich parents would be able to send their kids to college, because they'd be able to win all the bidding wars.

There are only so many rich parents. Either (1) schools will close down, or (2) schools will lower prices. I'm willing to bet that the answer will be (2) for the vast majority of schools. Schools will not opt to stay open with 60k/yr tuitions and 0 undergrads.

We don’t have to speculate. There was a time before the federal student loan program and tuition prices were roughly 10% of their current price.