A private bank provides a student loan that the government has insured against default. This is an example of

B When a private bank issues a student loan that is insured by the government in case of default, the federal government is acting as a guarantor—not issuing the loan directly, but promising repayment to the lender if the borrower defaults. This is a classic example of a federal loan guarantee program. Loan guarantees are off-budget unless called, and the government only incurs a liability if the student defaults. Relevant Reference: FASAB SFFAS No. 2 – Accounting for Direct Loans and Loan Guarantees Credit Reform Act of 1990 OMB Circular A-11, Section 185 – Federal Credit Programs Answer : B. a loan guarantee