What if Washington cancels federal student debt en masse?
A sweeping student-debt jubilee is a deficit/duration and ABS trade: added issuance and fiscal-impulse/inflation fears lift real yields and the long end, while loan-servicer (SLM, Nelnet) and student-ABS spreads reprice. No direct analogue; the rhyme is fiscal-supply tantrums (the 2023 deficit-driven long-end selloff after the Fitch downgrade). The forward twist: the inflationary impulse is debatable since cancellation boosts cash flow, not new spending — fade an overshoot in 30y yields.
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The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 1–3 years horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. Sweeping federal student-loan cancellation enacted, loan-servicer and ABS markets reprice, deficit and inflation fears rise. The trigger decomposes into signed root‑shocks — Fed policy path ▲ · Inflation expectations ▲ — which propagate through our causal graph to the markets below.