Huge difference between student loans and mortgages - the only pain felt will be by the students and taxpayers who will (again!) make the lenders whole on their bad bets:
Student loans cannot be discharged even if you declare bankruptcy - while home owners could walk away and hand the keys to the bank.
Student loans are guaranteed by the government - the issuers just file for compensation.
The sickening part is that once the lender gets paid in full for a non-performing loan they buy loan back from the government for 10% or so and then file a lien on any future earnings.
Sure: Now they're funding the loan program directly. At the moment it's profitable, but if there are ever losses they'll come directly from the taxpayers' pockets.
And there are indirect losses, too: Imagine the government started running a program to pay people $20K+/year (think grants + loans) not to work for four years, provided they paid some of it back at low, capped interest rates. Surely a lot of people would take the government up on that offer, and instead of being productive taxpayers, contributing to the economy and to the treasury, they'll sit around playing XBox. Maybe it turns out that the average college degree program is a better investment than this, even accounting for the lost GDP and tax revenue. But there's no way to be sure, since there's no market at work.
The government insured those loans before AND after the change. It was on the hook for loan losses before and after.
The indirect effects are MASSIVE BENEFITS for taxpayers, not losses. College graduates have lifetime income of $1M+ more than non-graduates, and this income is of course taxed at each individual's highest marginal rate. They have half the unemployment rate of non-graduates so they consume less unemployment and incur fewer other costs to government.
Student loans cannot be discharged even if you declare bankruptcy - while home owners could walk away and hand the keys to the bank.
Student loans are guaranteed by the government - the issuers just file for compensation.
The sickening part is that once the lender gets paid in full for a non-performing loan they buy loan back from the government for 10% or so and then file a lien on any future earnings.