First of all, student loans tend to be much larger than other loans, so it's different from a situation where a person takes out a little credit and then it slowly accumulates over time without any one point where the person says, "Give me $250,000 - I can pay it off with my part-time job at Radio Shack".

Second, banks factor risk of default into their cost of borrowing (or at least they should - let's not get started on a subprime discussion here). However, because the Federal government is involved in the student loan process they don't really have the same latitude to do that with student loans.

Third, as Praziquantel pointed out below, the very subsidizing of education has led to soaring costs and outright fraud (I think it's the University of Phoenix Online, American InterContinental, Ashford, and a whole host of other colleges that are milking the system in very unscrupulous ways).