the fact that all income will go to debt collectors anyway

Not in any real world I know. Indentured servitude has been abolished and I haven't seen any debtors' pits around lately.

Specifically, the only problem is debt not dischargeable in bankruptcy, that is, in the US, just student debt. If you have, say, credit card debt -- just go declare bankruptcy, I don't see any useful consequences of a charity helping you avoid the costs of going bankrupt.

So, student debt. Is there empirical evidence that a lot of people choose not (legally) work because they have high student debt levels? Does that happen in reality? Is it a really big problem worth focusing one?

As a practical matter, also note that there are legal limits to how much of your salary can be garnished for unpaid debts. It is not 100%.

In the United States, only 25% of after-tax income on income over the equivalent of a thirty-hour minimum wage workweek, excepting alimony, child support, tax debt, and certain chapter 11 bankruptcy court agreements (none of which are types of debt a charity can purchase for pennies on the dollar).

Most types of debt that can be purchased for pennies on the dollar are also dischargible through bankruptcy, and have not reached the garnishment stage or reached the garnishment stage in ways that mean very little income is going to debt collectors.

I'm not aware enough of other national laws to comment on how things look elsewhere.

There's some value to it, but you'd have to target the matter very carefully to get reasonable returns.

Cannot upvote this enough to show how much this changed my mind: OP now seems like a clever solution to the Parfit/Newcomb-type problem outlined in parent. Can we find this problem elsewhere in economics?