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Biden's Student-Loan Relief Plan Stirs a $100 Billion Plus Debt Market

  • Analysts expect paydowns on over 50% of FFELP student debt ABS
  • The capital could be reinvested into CLOs, SASB CMBS instead
Joe Biden
Joe BidenPhotographer: Eric Baradat/AFP/Getty Images

President Joe Biden’s student loan forgiveness program could upend a more than $100 billion market for bonds which repackage older student debt, rerouting funds to a small suite of other floating-rate structured products instead. 

The administration revealed a raft of student-loan relief measures last week, which will forgive as much as $20,000 in federal debt held by some 43 million Americans. But the plan is also likely to incentivize borrowers to swap older, bank-owned loans that don’t qualify for the benefits for new loans that do qualify under the Direct Loan program. This would slash in half the existing Federal Family Education Loan Program (FFELP) asset-backed securities market financed by those older loans predating 2010, according to BofA Securities.