> This would absolutely happen, but the first step towards that would be a 2008-like situation all over again, because banks would suddenly have to absorb massive unexpected losses (as they did in 2008), and all of these would cascade.
Except student loans in America are almost nothing like regular loans. Until 2010 they were backed by the government which made issuing them as a bank as easy as printing money--you collect the interest while it's paid and then let Uncle Sam take the losses when someone defaults. (Even in this article notice that it's the DOE that's coming for the loan. ) Post 2010 the loans are issued by the government so you cut out the middleman taking all the profit. Either way there won't be a 2008-like situation.
Except student loans in America are almost nothing like regular loans. Until 2010 they were backed by the government which made issuing them as a bank as easy as printing money--you collect the interest while it's paid and then let Uncle Sam take the losses when someone defaults. (Even in this article notice that it's the DOE that's coming for the loan. ) Post 2010 the loans are issued by the government so you cut out the middleman taking all the profit. Either way there won't be a 2008-like situation.