The Trump administration confirmed Monday it is considering selling portions of the federal government’s nearly $1.7 trillion student loan portfolio to private investors. Officials say no final decision has been made. The proposal signals another step in president trump’s broader effort to reduce federal involvement in higher education and ease the burden on taxpayers.
Under the Higher Education Act of 1965, the Secretary of Education, in consultation with the Treasury Department, has authority to sell existing Direct Loans if the transaction imposes no net cost to the federal government. Any potential sale would transfer ownership and collection rights to private companies, though the original federal loan terms would theoretically remain intact.
Supporters argue the move could generate immediate revenue and reduce administrative strain on the federal government. They contend that private-sector management may offer more efficient servicing and innovative refinancing structures. Backers also maintain that taxpayers should not shoulder long-term risk tied to massive outstanding loan balances.
Critics, however, warn of possible conflicts of interest and raise concerns about borrower protections. Elizabeth Warren criticized the proposal, stating that instead of assisting Americans burdened by student debt, the administration is considering steps that could harm borrowers. She accused the administration of favoring Wall Street over working families.
Department of Education Under Secretary Nicholas Kent responded that the department has met with stakeholders to discuss ideas but has “not taken any final actions or made final decisions regarding selling all or part of the student loan portfolio.” He added that officials continue to explore options aimed at reducing taxpayer exposure and restoring the financial health of the portfolio.
Kent emphasized that the department remains focused on guiding borrowers back into repayment and reducing delinquency and default rates. Federal student loan payments resumed after pandemic-era pauses, and many borrowers are navigating repayment transitions.
The potential sale comes as Republicans advance broader reforms through budget reconciliation. Beginning in July, new borrowers will be limited to two repayment options: the Standard Repayment Plan or the Repayment Assistance Plan. Borrowers currently enrolled in other plans will be transitioned into one of those two by July 2028, according to reporting from The Center Square.
The administration frames these changes as necessary reforms to address long-term fiscal sustainability and reduce federal overreach in education finance. With $1.7 trillion in outstanding student debt nationwide, the outcome of these discussions could reshape the federal government’s role in student lending for years to come.
