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%.