Seems incredibly unfair to those who paid back the debt early or abstained from higher education altogether.

Not only that, it puts current debt holders in a strange position. Do they act responsibly and pay off the loan quickly, knowing that there's a very real possibility their efforts are wasted if whole thing gets written off? Or do debt holders drag things out and make the minimum necessary payments and pray for a bailout, knowing that if the government never forgives the loan then they'll get screwed by the compounded interest?