This is just a restoration of the system that was in effect before the Clintons made it illegal to discharge the debt under bankruptcy. This allowed the government to effectively put these kids into debt slavery for the rest of their lives.
There is no good outcome here short of cancelling future government-guaranteed student loans. There are plenty of people in their 40's now who owe more thanks to interest and penalties than they borrowed after paying on the debt for 15 years.
At what point do you just call force majeure, tell the banks they're only going to get $0.25 to $0.50 (at best) on the dollar of outstanding debts and write the debt off.
This is what should have happened with the robo-signed mortgages in 2007-8 but, no.