The real problem is the guaranteed federally-backed loans that aren't dischargeable. Remove that and the tuition fees and attendance will come back down to earth.
I doubt that reducing the consequences to borrowing will lead to less borrowing. The opposite would happen.
Universities don't care if you default on your loans, they've already been paid.
If they're dischargeable, rates will just go up, or the government will have to subsidize them further. 17 year old kids aren't choosing whether to go to college based on whether the rate they get on their loan swings a few points in either direction.
