It was eye-opening a few weeks ago when the federal Consumer Financial Protection Bureau took a deep look at private and federal student loans outstanding and concluded that the market had topped $1 trillion.
Equally sobering is a new analysis by financial markets researcher Doug Short. On his blog today, Short offers a pop quiz:
What line item is the largest asset on Uncle Sam’s balance sheet?
A) U.S. Official Reserve Assets
B) Total Mortgages
C) Taxes Receivable
D) Student Loans
The correct answer, as of the latest Flow of Funds report for Q4 2011, is … Student Loans.
Yes, it’s an IOU to you. But to the federal government, it’s a financial asset bigger than any other.
Just in case you’re thinking that student debt could help pay off the national debt, Short notes that, “assets are, sadly, the trivial side of Uncle Sam’s Flow of Funds balance sheet — a bit less than 1.36 Trillion. The liability side totaled 12.28 Trillion at the end of Q4.”
— Paul Tosto