Trump Gonna Sell Student Debt To Wall Street. Remember How Great That Worked With Mortgages?
This shit again? We could subprimal scream.
The Trump administration is looking to revive a bad idea it played around with in Trump’s first term, to sell some portion of the government’s $1.6 trillion in student loan debt to private investors, Politico reports, citing three anonymous insiders who know things. The idea would be to reduce the amount of debt held by the Education Department, which currently manages student loans, before moving the whole student loan system over to either the Treasury Department or to imprisoned mafiosi in the Bureau of Prisons maybe. Haha, just joking, Trump would probably pardon those guys anyway.
The idea is being discussed by “senior Education Department and Treasury Department officials,” with the aim of selling off “high-performing” parts of the student debt portfolio so rich fucking banksters can make a profit trading in people’s student loan misery like God intended.
The one possible saving grace is that actually going through with the scheme might be more complicated than it’s worth:
Selling federal student loan debt raises significant logistical and legal concerns, adding new uncertainty for borrowers. Key questions include what happens to borrower protections — typically more generous than in the private market — and whether the government would continue guaranteeing any of the loans. The federal government enjoys more powerful debt-collection abilities — such as garnishing tax returns or Social Security benefits — than do private lenders.
Then again, when has “makes little business sense” ever been an impediment to Great Leader?
An unnamed “senior administration official” told Politico that the administration is “committed to analyzing all aspects of the federal student loan portfolio,” adding that “Unlike the previous administration, we are focused on ensuring the long-term health of the portfolio for the benefit of both students and taxpayers.” Translation: “Joe Biden actually helped people who were struggling with student debt. We promise to put the screws to them to punish them for going to college and putting on airs. Also, we all went to Ivy League schools but we resent them.”
Federal law allows the Education Department to sell off student debt, but only if taxpayers don’t lose money on the deal. It’s just that no other administration has tried it.
An Education Department analysis done during the first Trump administration “ultimately showed that the federal student loan portfolio was worth far less than government accountants had projected.” After COVID hit and Trump was distracted by trying to make the numbers go down by ignoring them, the student debt proposal was shelved.
Several of the experts who spoke to Politico said the whole idea seemed dumb, which almost guarantees that Trump will push it as far as possible.
Preston Cooper, a senior fellow at the American Enterprise Institute, said selling off student loans was a dubious idea that made little fiscal sense. Private investors, he said, wouldn’t be willing to pay more than the loans are worth. Even if the goal is to shrink the portfolio and ease administrative costs, he said, it likely isn’t worth it.
“I really don’t see a scenario here where taxpayers come out ahead,” he said. “I think the most likely scenario is that taxpayers get less than the loans are actually worth.”
An idea so bad that even the American Enterprise Institute says it’s crap? Sounds like an invitation for Trump to insist on going forward, and then when taxpayers lose a bundle and borrowers are ruined, he could then insist it was a huge success that nobody thought possible. Or just not answer questions about it at all.
Michele Zampini, a policy wonk with something called the Institute for College Access and Success, told the Independent that trying to sell the federal student debt portfolio to investment bankers “doesn’t really make good sense, either from a borrower perspective or a taxpayer perspective.”
While some aspects could remain the same, borrowers may see fewer benefits and private owners could have a more difficult time collecting on loans, she said.
Zampini said student loan holders would likely still be entitled to the same repayment options and protections that are in statute, regardless of whether they’re repaying the debt to the federal government or a private entity. These legal protections can only be changed through an act of Congress.
In fact, Zampini says, it’s difficult to say what private investors would even want to buy student debt, since it’s “not a particularly attractive investment.” There aren’t necessarily any assets that could be seized when someone can’t pay, and private companies can’t dun a borrower’s tax refund or Social Security the way the government can.
Then again, in a world where private equity never seems to run out of ways to fuck people over for the sake of profit, it may be premature to think that some clever number-diddlers won’t spring up and find a way to make bank off student debt. This administration is always happy to align itself with people who just can’t stop themselves being total quants.
[Politico / Independent]
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I miss checks and balances on terrible ideas that will further devastate our people.
This also sounds like a ploy to me to kill off the 20 and 25 year forgiveness.
“Oh gosh, private lender lost the records of your loan, guess you have to start over!”
“Oh we changed the regulations so once it was sold to private lender, the (clock reset)/(forgiveness no longer applies.”