It’s now been roughly eight years since the bursting of the housing bubble nearly tanked the U.S. economy. With collective student loan debt now above $1.3 trillion, Navient (NAVI), SLM (SLM) and Nelnet(NNI) could soon be in big trouble.

Traders who shorted Fannie Mae (FNMA), Countrywide and AIG(AIG) back in 2007 made a killing when the housing bubble burst. If the student loan bubble is the next to pop, the three stocks below could be the best shorts in the market.

Navient (NAVI)

Things are so bad at NAVI that the stock may not even need the housing bubble to collapse to become a profitable short. Remember how banks relied heavily on income from mortgage-backed securities created from pools of terrible mortgage debt during the peak of the housing bubble? NAVI funds roughly 75% of its operation from the sale of student loan-backed securities. The loans these securities are comprised of yield about 2.5%, and NAVI’s asset-backed securities (ABSs) yield 1.25%.

Much like the banks selling mortgage-backed securities during the housing bubble, the problem arises for NAVI when student loan borrowers stop making their payments. Earlier this year, the Wall Street Journal reported that more than 40% of Americans with government-backed student loans aren’t making timely payments on those loans.

“If you read the covenants of the bonds on these federal loans, they say that if the debt isn’t properly managed, the government doesn’t have to pay,” hedge fund Pine Capital founder Taylor Mann explains.

Mann has been outspoken about Pine Capital’s short position in NAVI.

With a minuscule P/E of only 5.3, NAVI stock may look like a dangerous short. But if the student loan market collapses, there is no question NAVI will be dragged down as well.

SLM (SLM)

SLM now produces…

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