Trump admin considering offloading parts of $1.6 trillion student loans to private investors

Donald Trump’s administration is now reviewing ways to sell large portions of the government’s $1.6 trillion student loan portfolio to private investors, according to Politico.

The talks, which have been quietly unfolding for months, involve officials at both the Education Department and Treasury Department, with a focus on slicing off the most “high-performing” parts of the debt that currently affect around 45 million Americans.

The idea isn’t new. During Trump’s first term, the Education Department hired consulting firms to assess how much the government’s student loan holdings were actually worth. That earlier review revealed the portfolio was valued much lower than government bookkeepers had assumed.

Once the pandemic hit, everything stalled. But now, with Trump back in the White House and aggressively pushing to reduce the federal government’s direct role in lending, the effort is back on the table and moving again.

White House pushes to cut Education Department’s student loan role

Inside Trump’s administration, the latest discussions are being handled directly by political appointees, bypassing the rank-and-file. Officials have spoken with people in the finance world, including potential buyers, to understand how parts of the debt could be sold without hurting taxpayers.

They’ve also explored bringing in a private consulting firm or even a major bank to dig deeper into the numbers and structure possible deals.

Under federal law, the Education Department can sell off student loan debt, but only if the Treasury Department agrees and the sale won’t end up costing the public. That makes this tricky. There’s not much history of these kinds of sales happening, especially not at this size.

The administration is also considering something even bigger: transferring all or parts of the federal student loan portfolio away from the Education Department and handing it over to the Treasury Department instead.

Trump has already pledged to shut down the Education Department, so giving the portfolio to the Treasury is being looked at seriously.

There are serious risks for borrowers. Federal loans come with protections private loans don’t—like income-based repayment, options for forgiveness, and stronger oversight. Private lenders don’t have those same requirements.

The federal government also has far more aggressive collection tools, like taking tax refunds or Social Security checks. If the loans are sold off, nobody’s clear whether those benefits would vanish. Still, a senior official in the administration said that:

“The Trump administration is committed to analyzing all aspects of the federal student loan portfolio. Unlike the previous administration, we are focused on ensuring the long-term health of the portfolio for the benefit of both students and taxpayers.”

Trump team halts forgiveness and restarts collections

Trump’s overhaul is already being felt. His administration has blocked nearly every major student loan forgiveness policy introduced under Joe Biden.

That includes shutting down more generous repayment plans and ending pause extensions. In fact, collections on defaulted loans, frozen since March 2020 due to the pandemic, have now resumed.

Trump’s Education Department is also working to revamp how external servicing companies deal with borrowers, with plans to replace the current roster of contractors with new ones focused on collections.

Over the summer, things got worse for borrowers in long-term repayment. The government temporarily paused forgiveness for those enrolled in Income-Based Repayment, or IBR, a program that wipes out remaining student loan debt after two decades (or 25 years, depending on the loan’s age).

IBR is now one of the only options still standing for federal borrowers after Trump’s allies in Congress passed his “big, beautiful bill,” which killed off multiple other repayment plans.

Mark Kantrowitz, a longtime higher education expert, said the pause on IBR forgiveness left many long-time borrowers stuck. “That’s because IBR is the only income-driven repayment plan still available that leads to loan erasure,” Mark said.

Exactly which loans could be sold isn’t known yet. Talks are ongoing. But one thing is clear: Trump’s administration is going full speed toward a major student loan shakeup, with private investors waiting to scoop up whatever gets put on the table.

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