The most likely outcome in the tow truck case is that they repossess the tow truck and sell it at auction, only losing a small fraction of the money they loaned you. If someone can't afford a truck they borrowed, you still have a truck.
You can't take back someone's education, which is what makes this type of loan intrinsically riskier. Because you can never get rid of student loans, though, they don't have to do any risk analysis or say "no" to any students. They say "sure", no matter what the data says on the ability to repay for the type of degree that you're applying for. Since nobody is denied funding to go to college, colleges have no economic incentive to price degree programs by expected income. The result is that college becomes more expensive and less accessible to everyone.
Yeah. The dirty/ugly truth is that, economically, the real answer to this problem is not very pretty. Loans would be given out to people with demonstrated academic success, and with a pathway to a job with a proper income to support repayment. You would probably have parents cosigning for loans.
The practical affect would likely make college much more difficult to access for minorities and other individuals low on the socioeconomic status spectrum. It would likely have a net effect of slowing upward mobility and create a college aristocracy.
It really depends on whether the degree is actually relevant to their employability.
If one has a degree in winemaking or philosophy, does rescinding their degree have a significant impact on their employability? If not, then they could just tell the bank to rescind it while still getting the education.
You can't take back someone's education, which is what makes this type of loan intrinsically riskier. Because you can never get rid of student loans, though, they don't have to do any risk analysis or say "no" to any students. They say "sure", no matter what the data says on the ability to repay for the type of degree that you're applying for. Since nobody is denied funding to go to college, colleges have no economic incentive to price degree programs by expected income. The result is that college becomes more expensive and less accessible to everyone.
It's a really bad situation.