Abstract
This Article outlines looming budgetary and accounting issues with federal student loans and proposes securitization as an innovative mechanism to reform federal accounting, reduce federal balance sheet risk, and provide a new education quality indicator. The current federal loan program is unsustainable because it overestimates the repayment rates and underestimates the cost of certain loan programs. Securitization will reduce that federal risk. Additionally, by forcing academic institutions to bear some of the risk, securitization will create a neutral pricing mechanism outside the direct control of federal regulators to show whether academic institutions provide a quality education. While complicated, this proposal provides an innovative, back-end-loaded-solution to introduce risk-based pricing into student loan programs without placing the risks fully on uninformed students.
Recommended Citation
Proudfoot, Robert
(2014)
"Securitization of Student Loans: A Proposal to Reform Federal Accounting, Reduce Government Risk, and Introduce Market Mechanisms as Indicators of Quality Education,"
University of Massachusetts Law Review: Vol. 9:
Iss.
1, Article 2.
Available at:
https://scholarship.law.umassd.edu/umlr/vol9/iss1/2