In her speech at the Democratic National Convention, Hillary Clinton exclaimed, “Bernie Sanders and I will work together to make college tuition-free for the middle class and debt-free for all!” How she intends to do that remains something of a mystery, beyond higher taxes on “Wall Street, corporations, and the super-rich.” But it’s hard to imagine the student-loan industry and the burden of student debt getting any worse for taxpayers and borrowers than it is now.

A largely overlooked report released in February by the Government...