It's nice to see the paperwork hassle removed for something like this, but the cynic in me can't help but think of the bank executives all across the country popping corks on champagne over the multibillion dollar lump sum settlement on loans that would have otherwise only trickled repayments in as people manually filed paperwork. Essentially this means they're earning millions on the billions that they can now reinvest immediately.
My understanding is that there is a significant chunk of federal student loan debt still owned by banks, and the older debt (pre 2010) would be more likely to be in default due to permanent injury/disability.
>Guarantor. Up until 2010, many federal loans were issued via the FFEL program, where private commercial lenders (i.e., banks) issued federally-guaranteed loans. An act of Congress in 2010 eliminated the FFEL program, so now all federal loans are issued directly by the U.S. Department of Education’s Direct lending program.
So no banks were at risk anyway, everything was guaranteed by the feds.
Federal student loans are zero risk to banks under all circumstances since they cannot be discharged in bankruptcy and the government guarantees the loan.
