And, on the flip side, the loans cannot be discharged through bankruptcy. Therefore, there's a huge incentive on the lender's part to make such a loan. (Similar to NINJA loans and liar loans in the mortgage banking crisis of a few years ago.)
Well, the most you can take out is $5,500 as an 18 year old. They're more than happy to legally deny you any other loans if you don't have the support of a rich family to cosign some private ones for you.
Many loans cannot legally be denied. This removes what otherwise would be a barrier to frivolous spending.