What Would Happen to the Student Loan Portfolio If the Debt Ceiling Is Breached?
In less than two days, if Congress cannot reach an agreement on the debt ceiling, it will be breached. This means that that U.S. Treasury will be unable to pay the bills. Thus far, the U.S. Treasury has not been vocal about what they will do if the ceiling is breached. But when it comes to student loans, the ones owned by the U.S. government, things could get problematic if the U.S. Treasury finds itself selling off its assets. Of course, there is always talk about this sort of thing happening (for instance, there are oftentimes suggestions that the national parks and the large swathes of federal land in Idaho and in other Western states be sold off and privatized. Thankfully, that has not yet occurred).
In fact, the old legacy regime (the overseers of student loans - the big ones being Sallie Mae and Nelnet), those who were part of the FFELP program, always wanted something like this to take place, i.e., the total privatization of the student lending industry. Indeed, Mitt Romney, while campaigning in the last presidential election, called for the resurrection of the old FFELP program. While that is unlikely to happen, if the student loan portfolio were to be totally privatized, a new, far more insidious program, the FFELP program on meth and cocaine, could indeed emerge.
But right now, this is merely hypothetical. Nevertheless, it warrants attention due to the serious nature of the current situation, as we are nearing default rapidly. That means that