Failing students when it might cause them economic ruin
You are responsible for teaching the students to the best of your ability, and to judge their capacities to use what they have learned. That judgment is made based on their grades. So you have several things to think about here.
Are you teaching the best you can? Teaching does not mean "downloading facts", as I'm sure you're aware. It means "transferring knowledge, skills, and attitudes". That "transfer" part is the important bit — transfer means that the student is able to reproduce and use what they've learned. Is your teaching enhancing this transfer? This is a tough nut to crack — how do you know? Are you planning your assessments so that you can really tease out the nuances and to see which students really understand, or are they just assessments because you need to assign a grade somehow? Your institution might have a center for teaching how to teach, and if you feel that you aren't teaching your best class then start there. Otherwise, lots of books and resources exist, which I'm sure we can all provide.
Are you assessing fairly? Fairly doesn't mean easily. It means that you are creating assessments that actually test understanding and that a student with reasonable ability will be able to succeed at. It also means to understand their context. It's easy to make a "really good" assessment that everyone fails because they also have three projects and two midterms in their other courses. Are your expectations clearly communicated, and are you ensuring that you only assess what you've asked for? (that doesn't mean that you can't expect students to go above and beyond, just that you need to tell them you expect them to)
Are you assessing accurately? I'm distinguishing this from "fair", but you can treat "fair" and "accurate" as two sides of the same coin. Accurate means that your assessments are set up so that appropriate weight is given to appropriate topics, and that your tests actually enable students to display their understanding and capacities, rather than whether they memorized the example or found the answer on stack exchange. Creating fair assessments is challenging, but there is a lot of research and resources available.
Are you giving every student the chance to seek help? I often find that if students are slipping through the cracks, setting up a regular meeting with them to keep them on track can do wonders. However, I am in a job in which I'm required to work with students like this, so it's easy for me to do. If you are a busy research professor who is teaching two courses per semester while juggling other things, it's a lot harder. Ultimately, the final exam is not when a student should find out they failed the course. They should know that they are on a bad path long before then, and should have opportunities to get on track.
If you are doing these things, then you are not causing them financial ruin. It's similarly not fair to say that the students are causing this — you don't know their context and can't make the judgment. Perhaps they went to a bad high school that just didn't prepare them, or perhaps they are always on the train to another city because their parents are sick and they can't attend classes. It is not your responsibility to help them in this way unless you are capable of providing everyone the same help. Which brings me to the most unfortunate reality of post-secondary education:
Not everyone can make it. For whatever reason, some students simply will not demonstrate that their abilities are up to the standard that has been set. Notice the wording I used there — I didn't say that they don't have those abilities, but that they will not demonstrate that they have those abilities. Provided you are assessing them fairly/accurately, teaching the best you can, and giving the help they pay for, then you are providing them with every opportunity to demonstrate those abilities. If they are unable to do so, then it would be unethical to let them pass regardless of the reason.
Take the example of a medical student. Do you want to pass someone who does not have the necessary knowledge to treat patients correctly? It is your duty to make sure that only the ones who know what they are doing will pass. This may be less strict in other subjects but the principle is the same.
--- EDIT --- Another example where this becomes clear would be an airplane engineer or pilot that does not have the necessary knowledge (thanks to Mike's comment below!).
Ultimately you aren't responsible for the behavior of your students nor for their bad decisions. You aren't responsible, either, for how they react to a failure. For some students, as I have seen, a failure can be a wake-up that gets them onto a better path.
You certainly aren't responsible for the terrible way that we finance higher education in the US as long as you are willing to pay taxes for the common good.
I'm assuming, of course, that you are responsive to their needs and that you try to do what you can to help them before the failure occurs, but sometimes you just have to call it what it is. It may help them change majors. It may help them find a career path that they would enjoy more. Lots of things are possible, but all outside your control.
But when you do fail students it is helpful, when possible, to advise them about their options. Simply continuing on without some change in behavior or attitude is likely to just get them deeper into debt, both educationally and financially.
Be honest, but be helpful.
I'll also note that it is possible to design a system in which it is hard to fail for a student willing to work. For me this meant the possibility of a student repeating work for a better grade. Grades weren't given as gifts, but on demonstration that the important lessons were actually learned, even if not at the first trial.