I will concede that the government should actively stop treating student loans differently from other debt in bankruptcy law. You win on that matter. Of course, this sad situation is the result of an earlier activist government intervention into student loans that failed to account for unexpected consequences, so I don't feel totally defeated here.
The law of unintended (unexpected) consequences as it applies to legislation is hardly a good reason to refrain from future legislation.
The whole thing -- the whole world, really -- is a work in progress. Unbuilding what we've built already seems much less economical (in the human sense as well as the financial) than continuing to thoughtfully tinker, while leaving open the possibility for making occasional big changes as needed.
There should be zero federal involvement in student loans. Same goes for mortgages and other sorts of debt that the USG has become entangled with.
This position would be tenable if the banks hadn't run completely amok in the last 30 years. Before that, a person could imaginably get through college with scholarships, private loans (not that frequent, either), work, and family support. The market distortions visible since about 1980 (always my milepost, for no really good single reason) have made wages smaller, school costs higher, employment harder to find, and family support less possible. The government stepped in with the idea to leverage bankers' support for student loans, the legislation was written to benefit the banks (can't imagine how that happened), and here we are.
Under earlier banking regulations and market conditions, you'd expect loans to have become available at affordable rates and with tenable terms. Those conditions are long gone.
Sometimes I wonder if you aren't just living in 1975. The world has become so much nastier and lopsided since those days that the general public, the average person, is more and more at the mercy of institutional forces far more pervasive and powerful than s/he can resist alone. I don't think this is a benign or neutral condition. It's malign. The government, which supposedly is us, is being called on to help us. I can't imagine what real-world solution you suggest instead.
I have no problem with an alternative economy developing. In fact, that is what the regional cooperative movement is trying to do with the regional food economy right now. The more we do with this principle, the better. Regional energy would be the next priority, in my opinion.
But without thoughtfully elected, empathetic representation (and maybe even with it) the government will hinder, rather than help, those new developments. We need to participate in and influence our government, not just wish it would stop and go away because at the moment it's messed up. Along with all the wrongheaded things it does, it also does helpful and necessary tasks on a scale not available to little regional cooperative movements and people paying for things in scrip.
If you could point out historical and current real-life examples where persuading or forcing the government to go away greatly bettered living conditions for the citizens, I'd be more receptive to your arguments.