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If the default risk is borne by the US Treasury, then what risk do we have in general?
by ktta 9y ago
If the default risk is borne by the US Treasury, then what risk do we have in general?
- Raidion 9y agoThe risk that the increased supply of money lowers the value of that money. Not that this is the straw that's gonna break the camels back, but it's not like there aren't consequences to the taxpayer for allowing the government to allocate funds in a sub optimal manner.
- linkregister 9y agoThis money isn't unbounded; it's confined by the budget allocated to the Department of Education and various government organizations (like Fannie Mae, et. al.). Ultimately the Department of Education is responsible for this money. The last 30 years are remarkable in the amount of controversy surrounding student loans and the default of large education funds. The following article describes this in greater detail: https://tcf.org/content/report/student-loan-guaranty-agencies-lost-way/ https://tcf.org/content/report/student-loan-guaranty-agencie....
- Jeema101 9y agoI think the main risk would be a deterioration in the government's finances since the government is expecting to get paid back and is factoring in those payments to the financial outlook. That could in turn lead to an increase in the government's borrowing costs, which could affect lots of other things negatively.
- trophycase 9y agoClassic case of moral hazard.