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B) The Development of a Secondary Market for Student Loans Driven by Market-Based Innovation and Demand for Liquidity The student loan industry is undergoing a transformative shift with the rapid emergence and growth of a secondary market for student loans. Fueled by market-based innovation and increasing demand for liquidity, this evolving market is reshaping how borrowers and investors interact with higher education financing. What was once a largely illiquid, government-dominated sector is now experiencing dynamic private-sector participation, offering new opportunities for students, struggling borrowers, and institutional investors alike. ### The Rise of the Secondary Loan Market A secondary market for student loans functions like a traditional financial market where existing loans are bought and sold after they’ve been originated. While federal student loans were historically reserved for government-backed transactions with no secondary market, recent developments—especially at the state and private levels—are enabling structured, regulated trading of these loans. This shift unlocks a new layer of flexibility in managing student loan debt.