Realistically I wouldn't see this as entitlement to new people or to someone who is new to the cryptocurrency because as I used from some of the exchanges that offers loan, there most be an equivalent asset that is hold back on the exchange to serve as a repayment purpose.
Coinbase has been the most reputable exchange with a higher trading volume which even if they offers such loan on their platform they should have a means to regulate every loan that would taken from their platform to avoid going bankrupt when borrower has refused to repay back their loans.
Not all asset are allowed for holding back. The reason is because some asset mostly shitcoins can lost value anytime. Only top coins are allowed for holding back. Your right too, the USDT you are borrowing must be equivalent to the USDT of the asset that is being hold back.
Finally there is always a way to get back their money. The asset hold back will belong to Coinbase if any user becomes a loan defaulter. If you read in the disclaimer when taking the loan most of these things are there.
In fact from the information I also got is that any asset you wanna borrow, your balance is being converted to cbBTC. That is is to say for you to borrow if you have BTC it would be BTC=cbBTC to hold as collateral on their platform before you would be allowed to take loan from their platform. I think to me it's just like autoconvert before receiving loan.