This tracks.
That’s one tiny part of the problem, but it’s not the issue. That’s not why the government refuses to consider canceling student loan debt. It’s actually a lot worse than anyone imagines.
The reason the government refuses to even entertain student loan forgiveness is because of something called SLABS. What are SLABS, you ask? Good question. Because the world of finance really does not want you to know this! SLABS are Student Loan Asset Backed Securities. Sounds like a bunch of confusing terms that regular people can’t understand, right? It’s supposed to.
A lot of you were too young to remember what happened in 2008, and what exactly the crisis was that brought the entire economy to its knees. 1 million people lost their homes. It’s because the mortgage industry was taking the mortgages (loans) that individuals opened, split them into tiny little pieces, bundled them together with other tiny little pieces of other people’s loans, and sold them off. A huge industry was created that not only bought little pieces of people’s mortgages, but also made bets on whether or not those underlying securities (pieces of mortgage loans) would fail or succeed. It didn’t take long before the bets on the loans outsized the actual loans themselves - sometimes by a magnitude of thousands.
I know this is complicated, but hang in there. Here’s Selena Gomez in “The Big Short” to explain that betting a little better: 
Okay, so you’ve got lots of people betting on mortgages. See what happens next, is that the banks run out of qualified people for mortgages. There’s only so many people who had jobs that paid them enough and credit scores high enough to be deemed worthy. But they want to keep their cash cow going! What to do?
Of course, the way this problem was solved, was to hand out mortgages to everyone like free T-shirts. No job? No credit? No way to pay that mortgage we just gave you? No problem. They were making more money on the bets than on the underlying loans. They didn’t give a shit if you defaulted. They were making money on you whether you paid or not. And they didn’t care if you destroyed your life and your credit and your family because the financial industry was raking in massive piles of cash by selling and betting on people’s home loans. Eventually the house of cards came tumbling down, there was a massive foreclosure crisis, the industry was found to be operating completely fraudulently, and a million people lost their houses. Large financial institutions received a bail-out that we the taxpayers paid for. The individual families who got exploited and fucked? Got nothing.
So what does this have to do with student loans? Excellent question. The same thing that happened with mortgage loans being split into tiny pieces, bundled, and sold off has also happened with student loans. These bundles are called SLABS. Student loan asset-backed security. But wait! “Asset-backed”?? What asset? The asset is ostensibly...your degree.
This is now a potentially bigger problem than even the housing crisis in 2008: because back in ‘08, if you defaulted (stopped paying) on your mortgage loan, there was a physical asset to seize: your house. You can’t seize somebody’s English degree if they stop paying. This is why it’s nearly impossible to discharge any student loan debt, ever: because the industry making money off of student loans is making outsized bets that are larger than the underlying assets. Just like in 2008. If student loans were forgiven across the board, the ripple effect would capsize the domestic economy. Your $20,000 in student loans? Could represent $2 million in bets made on that loan.
This has already become an enormous hot potato between financial institutions as student loan repayment was paused during the pandemic. Suddenly there’s no payoff for these bets institutions are making on your student loans. There’s also no collateral they can repossess. What they thought was a profitable bet to exploit students and keep people in wage slavery forever, is shakier and shakier. When it finally bursts and goes tits-up, you can bet that the people who bought tiny pieces of your loans and then gambled it away will be the ones receiving a (tax-payer funded) bail-out. Not the students. And it’s already starting to go tits-up.
America: we’re #1. 🤮
Absolutely fantastic Investopedia article about SLABS
