I'm not sure about the derivatives market part, but remember that (in the US, at least) most student loans are administered by the federal government, and are 'guaranteed' by them. That means if you don't pay up, the government will fuck with you in all the various ways a government can (confiscation of tax refunds, wage garnishment, etc - and don't forget student loans are not covered by bankruptcy). That is why my loan interest is less than 2% over the fed funds rate - it's worth it to loan money at that rate, because there is effectively no way to avoid having to pay up, short of dying.