I agree about the student loans.. but how does the rest play out?

Fewer loans -> fewer applicants
Fewer applicants -> lower income for the university
Lower income -> budget/infrastructure cuts
– or –
Lower income -> Decrease in tuition
Decrease in tuition -> more applicants

I guess I still can’t see what the analog to foreclosure is for a university.

As a side observation, I also wouldn’t be surprised if the industry that has sprung up around college savings plans hasn’t also helped drive costs sky high. People have been conditioned to believe that college education will keep getting more expense and that you have to start saving -now- (while your child is still sleeping in the clear-plastic bin at the hospital) or be priced out forever.