The Trump administration is reportedly exploring the option of selling a portion of the federal government’s substantial $1.6 trillion student loan portfolio to private investors. Senior officials from the Department of Education and the Treasury are in discussions about this potential move, as detailed by Politico, which cites three anonymous sources.
This federal student loan portfolio currently serves about 42.3 million borrowers who collectively owe $1.67 trillion. This figure comes from the Federal Student Aid Report released back in August.
Additionally, officials are engaging with leaders in the financial sector, including prospective buyers of this student debt. Discussions apparently touch on the possibility of bringing in external consultants or banks to evaluate student loan programs, as well as how these private entities might assess parts of the student debt portfolio.
A senior administration official emphasized to Politico, “The Trump administration is committed to analyzing every aspect of its federal student loan portfolio. Unlike previous administrations, it focuses on ensuring the long-term health of the portfolio for the benefit of both students and taxpayers.”
The White House, Department of Education, and Treasury did not respond promptly to inquiries from the Daily Caller News Foundation.
During Trump’s first term, there were also considerations to offload either some or all of this debt to private investors, as reported by the Wall Street Journal in May 2019.
Preston Cooper, a senior fellow at the American Enterprise Institute, expressed skepticism about whether this would truly benefit American taxpayers. He commented, “There’s really no scenario where taxpayers come first,” warning that taxpayers might end up receiving less than the actual value of the loans.
On the other hand, Eileen Connor, executive director of the Project on Predatory Student Loans, noted that for such a transaction to make sense economically, it would have to significantly change the terms for borrowers. She added that potential buyers and student loan borrowers need to be aware that certain rights and protections associated with these loans cannot simply be dismissed in a sale to private companies.
Moreover, the Department of Education announced earlier this year that it would initiate a long-awaited recall effort for student loans, a first since 2020.
