That headline is from this Wall Street Journal piece. If you have a student loan-- loan is usually sold off before you ever receive a check. Heck, sometimes it's sold off before you even apply.
Say you, and a million other peeps, take out a student loan. The loan companies only have so much money right? So they need to get more money to make new loans. What the loan companies do is take like a million dollars worth of loans (or some other number) bundle them together and securitize them. Once they are a security, other people and institutions them.
The bank is happy because it now has more money. It can make more loans which it will later securitize so it can get more money and make more loans. It’s the circle of life if you are a bank. The students who took the loans are happy they get to go to college. The peeps who bought the securitized loans are happy because student loans are unbelievably safe. By the time these loans are paid off, and the securities reach maturity, the peeps who own the security will be rolling in dough.
But here is the new problem. No one is buying the bundled loans! Thus far, I have read several pieces and no one is talking about Stafford or Perkins loans --yet.
But I'd keep watching this issue or reading this blog.
