> The clause makes Lambda appear less attractive so not clear why it would be included.

It’s designed to dissuade people from seeking bankruptcy to discharge the debt.

I doubt it. Who would seek bankruptcy for 17% of their salary? And it also make Lambds FAR more unattractive.

The problem is if you can't get a job above a certain salary threshold. While Lambda's non-CA contracts allow for discharging the debt after 5 years of no job or low enough salary, it seems their contract for CA students does not allow for discharging the debt, ever.

Regardless, people don't necessarily go into bankruptcy over a single loan. It could be the combination of credit card debt, a mortgage, a car loan, plus the Lambda loan that puts them over the edge.