Possibly, your student loan was issued by one organization, is now held by another, is guaranteed by another, and may even be serviced by a fourth or even a fifth organization. Because of this, it may be difficult to determine who is responsible for your debt and how they did so. Although it is reasonable to assume that the federal government was engaged in some capacity, much also relies on the sort of loan that you took out.
Most lending entities are large organizations, such as national and multinational banks. On the other hand, once a loan has been created, it becomes an asset that may be purchased and sold on the market. Because doing so immediately improves their capital ratio and enables them to issue even more loans, banks are often encouraged to shift loans off books and sell them to other intermediary. This is because doing so allows the banks to make even more loans. As the government completely insures almost all loans, banks can offer them to customers at a higher price. This is possible because the default risk is not passed along with the asset.
Non-Government Owners
Most outstanding student loans are not retained by the government but rather by the lending institution or a private loan servicing business. Originators and third parties can each do collection services in-house or hire a collection agency to conduct such tasks on their behalf. SoFi Technologies, Discover Financial Services, and Navient are just a few examples of the most prominent names in the private student loan industry.
NelNet Inc. and Sallie Mae are private firms and quasi-governmental institutions like NelNet that have mutually advantageous working arrangements with the Department of Education and control many student loans. A significant number of the loans originated via the Federal Family Education Loan Program (FFELP), which the federal government has since superseded, are now held by Sallie Mae.
Federal Government as Creditor
In June of 2022, the total amount of outstanding consumer debt in the United States surpassed $4.6 trillion. Since 2010, this number indicates a rise of over $1.9 trillion, making it the largest single gain. The primary source of the problem is student debt, which the federal government has effectively monopolized thanks to a little-known clause of ACA passed into law in 2010. This meant taxpayers would be responsible for paying the cost of student borrowers defaulting on their loans. In 2010 CBO predicted that just 55% of loans belonged to this group; in contrast, this category accounts for over 93% of all loans.
Although it had been in the business of insuring loans since at least 1965, the federal government did not hold any student loans before the presidency of Bill Clinton. However, the federal government had been in the business of providing loan guarantees since at least 1965. The federal government progressively racked up approximately 670 billion dollars worth of student debt between the first year of the Clinton presidency and the final year of the George W. Bush administration.
Since 2009, such numbers have significantly increased. The United States Department of the Treasury stated in its annual report for the year 2020 that student loans made up over 20% of all assets held by the United States government. There is a lot of controversy around the expense of federal student loan programs. The CBO provides different estimates depending on whether low discount rates or "fair value" discount rates are used. Fair value estimates show that the government loses multiple billions of dollars per year, including administration expenditures.
However, according to another report that was published not too long ago, the Congressional Budget Office (CBO) estimates that when the results of the student loan programs are finalized in 2021. This indicates that the total result is a small loss. The government does not reclaim the value of the loans, leaving current and future taxpayers in the position of guarantee. Regardless of how the expenses are computed, the repercussions are the same.
